Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

CROYDON CORPORATION BILL

Read the Third time and passed.

Esso PETROLEUM COMPANY BILL (By Order)

Second Reading deferred till Thursday next.

Oral Answers to Questions — BECHUANALAND

Education

Mr. Emery: asked the Minister of State for Commonwealth Relations how many teachers for primary and secondary education are now employed in the Bechuanaland Protectorate; and what are their monthly salaries.

The Under-Secretary of State for Commonwealth Relations (Mr. Richard Thompson): At the beginning of 1960, 1,022 primary and 38 secondary teachers were employed in the Bechuanaland Protectorate.
I will, with permission, circulate the Answer to the second part of the Question, which contains a number of figures, in the OFFICIAL REPORT.

Mr. Emery: While I am grateful for that reply, may I ask my hon. Friend if he can say whether the figures that he will circulate are lower than the average throughout the rest of South Africa? My information is that they are, and this makes it particularly difficult for teachers to stay in Bechuanaland. Can my hon. Friend also say, on the figures that he has given, how many, in fact, are Africans and how many are Europeans?

Mr. Thompson: I think that my hon. Friend had perhaps better look at the figures, which will enable him to appreciate the position more accurately. In reply to his supplementary question, I would say that the salaries of all Government teachers were improved last year as a result of the recommendations in the Surridge Report.

Mr. Brockway: Is the hon. Gentleman able to say what is the difference in the monthly salaries of teachers in the European, the coloured and the African schools?

Mr. Thompson: Not without notice, but I think that if the hon. Gentleman will study the figures he will get some information.

Following are the figures:


RANGE OF TEACHERS SALARIES IN THE BECHUANALAND PROTECTORATE, DEPENDING ON QUALIFICATIONS AND EXPERIENCE


Unqualified Teachers


Men
£3–£6
Monthly


Women
£2 10s.-£4 10s.
Monthly


Qualified (non-Graduate) Teachers


Men
£6–£77
Monthly


Women
£5–£63
Monthly


Graduate Teachers


Men
£35–£119
Monthly


Women
£35–£95
Monthly


Head Teachers (Primary School)
£53–£96
Monthly


Head Teachers (Secondary Schools)
£80–£128
Monthly

Mr. Emery: asked the Minister of State for Commonwealth Relations what is being done to increase the number of teachers and the educational facilities within the Bechuanaland Protectorate.

Mr. R. Thompson: The salaries of Government teachers have been increased and the High Commissioner has arranged for a review of salaries of non-Government teachers.
A Colonial Development and Welfare grant of £16,500 has been authorised for the construction of a hostel for African boys at St. Joseph's College, Khale. Other wider plans are under consideration, but I am not yet in a position to give details.

Mr. Emery: While thanking my hon Friend for that reply, may I say that I realise, and I hope that he realises, that other plans will be greatly appreciated


as long as they are carried through in haste? Will my hon. Friend answer the question whether this will bring the facilities in the Bechuanaland Protectorate up to the standard in the other Protectorates in South Africa?

Mr. Thompson: We are certainly anxious to do that.

Oral Answers to Questions — INDIA

Wheat and Rice Shipments (Flag Discrimination)

Sir L. Ropner: asked the Minister of State for Commonwealth Relations what assurances he has sought from the Government of India that the agreement between that country and the United States of America for the shipment of 17 million tons of wheat and rice from the United States of America does not entail flag discrimination to the disadvantage of British shipping; and what assurances he has received.

Mr. R. Thompson: None, Sir. As the Minister of Transport said yesterday, the Governments of the United States and India are well aware of our views concerning the imposition of shipping conditions in transactions of this kind.

Sir L. Ropner: The whole of this agreement cannot be considered to be a very friendly act either on the part of the United States or of a member of the Commonwealth. Is my hon. Friend aware that quite recently American ships have been chartered to carry wheat from the United States to India at a fixed rate of freight of £9 at a time when the ships of the United Kingdom were compelled to accept a rate of freight only 2s. 6d. over £3? Can my hon. Friend say whether under this agreement the U.S.A. will not only obtain a monopoly of the carriage of 8½ million tons of grain but will also gain competitively by receiving a very high rate of freight?

Mr. Thompson: The amount of carriage reserved to the United States under this agreement is 50 per cent. and in that respect the agreement does not differ markedly from three earlier ones. My hon. and gallant Friend will recall what my right hon. Friend the Minister of Transport said to him yesterday, that he will watch this position carefully, and, if necessary, make representations if that seems appropriate.

Mr. Kershaw: Does not my hon. Friend agree that this agreement is a breach of G.A.T.T. by the United States? Will he draw the attention of his right hon. Friend the Chancellor of the Exchequer to that fact in the forthcoming negotiations for a revision of the terms of that treaty?

Mr. Thompson: I am certain that my right hon. Friend will take notice of what my hon. Friend has said on that subject.

Mr. Callaghan: What commercial freedom has India had in these transactions? Is this a free bargain between two independent countries, or is this grain part of a gift, a loan or aid of some sort, in which case any representations should be directed to the United States? Does not it appear that the United States is applying pressure, because of its willingness to supply the grain?

Mr. Thompson: That is broadly correct. These agreements are subject to United States legislation, which requires a shipping clause in aid grants, and the beneficiary under the shipping clause is the United States.

Oral Answers to Questions — SWAZILAND

Constitution

Mr. Brockway: asked the Minister of State for Commonwealth Relations what constitutional proposals are now being considered for the establishment of a legislature in Swaziland.

Mr. R. Thompson: The High Commissioner has asked the Acting Resident Commissioner to initiate consultations with the European Advisory Council and the Swazi National Council on the next steps to be taken in the field of joint consultation, with a view to making progress towards establishing a joint committee or council.

Mr. Brockway: I welcome the fact that steps are being taken in Swaziland following those taken in Basutoland and Bechuanaland, but in his discussions will the Minister be careful to maintain the principle of direct election, which has been applied in the case of the local councils in Basutoland, rather than allow all power to be in the hands of the chiefs?

Mr. Thompson: I am sure that the Resident Commissioner will have those considerations very much in mind. We had better wait until he has completed his discussions in connection with this proposed advance.

Oral Answers to Questions —  UNION OF SOUTH AFRICA AND HIGH COMMISSION TERRITORIES

Mr. Wall: asked the Minister of State for Commonwealth Relations what requests the South African Government have made regarding the handing over of refugees in the High Commission Territories; and whether he will make a statement about the future of those claiming asylum in these Territories.

Mr. Grimond: asked the Minister of State for Commonwealth Relations if he will ensure that political refugees from South Africa are not returned to that country against their will.

The Minister of State for Commonwealth Relations (Mr. C. J. M. Alport): I would refer the hon. Members to my reply to a Question by the right hon. Member for Middlesbrough, East (Mr. Marquand) on 19th May.

Mr. Wall: Can my right hon. Friend say whether he has now had any further information about the alleged statement of the South African Minister of Justice, and also whether he has had further thoughts about the division between a political and a criminal offence?

Mr. Alport: With regard to the second part of my hon. Friend's supplementary question, there is a later Question dealing with this subject. As for the first part, some inquiries were made of the High Commissioner, which I gather the Minister of Justice of the Union of South Africa has regarded as being the preliminaries to negotiations, but no negotiations have been started, and we were unable to give the information which the Minister of Justice requested on that occasion.

Mr. Grimond: Is the right hon. Gentleman aware that the categorical assurance which he gave on a previous occasion, that these people would not be extradited for political crimes but only for violations of criminal law similar to our own, was widely welcomed? Can he say whether, if any of these people

wanted to leave these Territories and come to this country, they would be helped to do so?

Mr. Alport: I have a number of other Questions on this subject. Perhaps the hon. Member will await my Answers to them.

Sir L. Plummer: The Minister will be aware that many of the political refugees have automatically violated the passport laws in getting out of the country. If extradition proceedings are called for on these grounds, can the Minister see that it is made quite clear that this is in fact a political offence and not a criminal offence?

Mr. Speaker: Subject to misreading something, I think that that anticipates a further Question.

Mr. Alport: I am not sure, Mr. Speaker. Perhaps I can answer that supplementary question, if only to clear up the point which the hon. Member is making. As far as I understand it, there is no violation of any Union passport legislation in connection with the movement from the Union into any of the High Commission Territories. That possibility would arise only subsequently.

Mr. Marquand: Returning to what the right hon. Gentleman said earlier about negotiations, will he make it clear that there is no intention to enter into any sort of bargain with Mr. Erasmus on terms of returning some refugees in response to a promise that other persons in South Africa will be released? There has been a statement in the Press to that effect. Will the Minister repudiate it now, so that there will be no further suspicion of anything of the kind? Further, will he indicate that he has no intention of giving the South African Government the names of refugees in British protected Territories?

Mr. Alport: We have already informed the South African Government of the difficulties with regard to the latter point made by the right hon. Gentleman. With regard to the former point, the best thing I can do is t3 re-state what I said previously in answer to a Question of his, namely:
It is not the intention of Her Majesty's Government to compel them to return to the Union on political grounds, though the House will recognise that the question of return to


answer criminal charges would be a matter for the courts."—[OFFICIAL REPORT, 19th May, 1960; Vol. 623, c. 1485.]
I can assure the right hon. Gentleman that there could not be any question of a bargain on political grounds in connection with this matter.

Mr. Sorensen: asked the Minister of State for Commonwealth Relations if he has considered the desirability of arranging for a provisional passport being issued to all refugees from the Union of South Africa, entering the Protectorates, who apply for one.

Mr. Alport: There is no difficulty about the issue of passports to citizens of the United Kingdom and Colonies or British protected persons in the High Commission Territories. The issue of travel documents to other persons is normally a matter for the authorities of the country to which they belong, but my noble Friend is considering whether, in present circumstances, any exceptional steps are desirable.

Mr. Sorensen: Will the Minister see if it is possible for either a passport or some equivalent to be issued to these unfortunate people and so implement the assurance that was given some time ago?

Mr. Alport: I have said, and I cannot go any further at the present time, that my noble Friend is considering whether any exceptional steps in this matter should be taken.

Mrs. Castle: Is it not clear from an earlier Answer which the Minister has given that, although no offence will be committed by the refugees under the South African passport laws merely by entering the Protectorates, it might be committed if, for example, they were to attempt to enter the Federation? Might they not, therefore, at that stage in their transit from South Africa, be in danger of extradition on the ground that a criminal offence had been committed? Would not the Minister, in order to make their political asylum a reality, approach the Federal Government to get an assurance that there will be no cases of extradition arising in transit?

Mr. Alport: I have explained that the matter of immigration law, under the constitution, is a matter for the Federal

Government. I am answering a Question which relates exclusively to the position with regard to the Protectorates.

Mr. Dugdale: asked the Minister of State for Commonwealth Relations if he has completed his consideration of the question whether the undertaking to give asylum to all South African political refugees reaching the High Commission Territories includes refugees sentenced under the Prohibition of Communism Act and other Acts making political offences crimes; and what conclusion he has reached.

Mr. Alport: This matter is governed by the Fugitive Offenders Act, 1881, as it applies between the Union and the High Commission Territories.
The offences to which Part II applies are stated in Section 13 of the Act. The powers of the courts to order or to refuse to order the return of a person under that Part of the Act are defined in Section 19.
It would not be proper for me to anticipate the manner in which the courts would exercise the discretion given to them under Section 19 of the Fugitive Offenders Act.

Mr. Dugdale: Does this mean that the Minister cannot anticipate the case of any man who is accused of a political crime and who, in consequence of an Act of the South African Government, becomes a criminal? Does he realise that this may make it impossible for people, not only in South Africa but on the other side of the Iron Curtain, to claim the right of asylum because they have been found guilty of offences which are made criminal in that country, while those offences are not criminal in this country at all?

Mr. Alport: I think that, if I may say so, the right hon. Gentleman finds this subject as difficult and obscure as I sometimes do myself. I would say that the positions of Commonwealth citizens or British subjects under the fugitive offenders legislation and of foreign subjects under the extradition laws are entirely different. I have gone into this, as I promised the right hon. Gentleman the Leader of the Opposition I would do, with care, and I think that perhaps the right hon. Gentleman will realise that, in any decision with regard to the law on this matter, in the light of the


discretion given in Section 19, there is appeal, if it is necessary to pursue it, from the court of first instance to the High Court, and we intend to make it clear that there will be an appeal from the High Court, if necessary, to the Appeal Court of the Territories, and finally to the Judicial Committee of the Privy Council. I think that the right hon. Gentleman and other hon. Members in this House will join with me in believing that in these circumstances and in the light of the relative sections in the fugitive offenders legislation, the responsibility for a decision in this matter should be properly left to the courts.

Mr. Dugdale: Is the Minister aware that that answer will be received with relief and satisfaction by large numbers of people throughout the Commonwealth?

Mr. Foot: Could the Minister say, in regard co appeals to the Judicial Committee of the Privy Council, whether it will be within the discretion of the appellate tribunals in the Protectorates themselves to give leave to appeal to the Judicial Committee, or whether it will be a matter of applying for special leave?

Mr. Alport: I understand, and again I should like to be absolutely certain in my answer, that the decision in this, which would be a criminal case, would be for the Judicial Committee of the Privy Council. I have also inquired as to the problem with regard to the financing of appeals of that sort, and I am assured that, so far as we are concerned, we would give every possible facility that we can give so that the appeal could be made in forma pauperis.

Mr. Stonehouse: asked the Minister of State for Commonwealth Relations if he will grant political asylum to the Reverend Marcus Kooper, Mr. Isaac Howiten, Mr. Arnold Selby, Mr. Joseph Matthews, Mr. Wilton Ymkwai, Mr. Patrick Van Rensburg, Mr. Moses Mabida, and Miss Molefe, political refugees from the Union of South Africa, who have escaped into the High Commission territories, and make documents available to them to enable transit through the Federation of Rhodesia and Nyasaland.

Mr. Alport: Entry into and residence in the High Commission Territories are

governed by the immigration laws in force, and it is open to the persons to whom the hon. Member refers to apply for residence permits. So far as travel documents are concerned, I would refer the hon. Member to my reply today to a Question by the hon. Member for Leyton (Mr. Sorensen).

Mr. Stonehouse: I appreciate the reply given by the Minister and I thank him for the consideration given to the issue of documents to these political refugees. May I ask whether representations are being made to the Governments of the Federation of Rhodesia and Nyasaland to ensure that the documents are recognised and that the political refugees are given full facilities for transit? Are representations being made to secure recognition of the passports being issued by Ghana?

Mr. Alport: The recognition of passports issued by another Commonwealth country is not a matter for me. I should have thought that travel documents issued to refugees from the United Kingdom would normally be recognised by other Commonwealth countries concerned.

Mr. Stonehouse: In that case, would the Minister indicate that there should be no possible objection to the recognition of passports issued by Ghana?

Mr. Alport: As I have already said, that is not a question for me.

Oral Answers to Questions — BASUTOLAND

Administrative Staff

Mr. Wall: asked the Minister of State for Commonwealth Relations to what degree the administrative staff in Basutoland is below establishment.

Mr. R. Thompson: The establishment is 33, and there are seven vacancies.

Mr. Wall: Does my hon. Friend agree that, besides their normal work, the administrative officers in the Protectorate now have to carry out the administration of what amounts to a Parliamentary system in addition to their normal work? Does he not agree that there is a case for increasing the establishment, and will he try to recruit from England rather than from South Africa?

Mr. Thompson: I am aware of the seriousness of the position in Basutoland. The Colonial Office, which recruits candidates for administrative posts in this country, is making every endeavour to fill the vacancies, but there is a shortage of candidates for the Overseas Civil Service generally. Steps are also being taken to find suitable Basuto to fill some of these vacancies.

Children (Employment)

Mr. Dempsey: asked the Minister of State for Commonwealth Relations if he is aware that 13-year-old children are being employed in Basutoland as underground miners; and if he will take steps to prevent this illegal practice.

Mr. Alport: There are no underground mines in Basutoland.
The hon. Member is perhaps misled by a feature appearing in the Daily Herald of 7th March last of an alleged Basuto boy miner of 13. The Rand agent for the High Commission Territories and members of his staff interviewed the youth and examined his records. They satisfied themselves that he was 18 years of age; had never been underground and had been employed on planting tree seedlings in one of the parks and washing dishes. He accounted for the fact that he was wearing a miner's hat at the time the photograph was taken by saying "I borrowed the hat from a friend of mine because it was raining and I did not want to get my head wet".

Mr. Dempsey: Is the Minister aware that further extensive inquiries were made into this and other incidents, and that considerable breaches in the law concerning the employment of young people were actually reported? Will he give an assurance that the law enforcement officers will take every step to prevent the employment of child labour in this Territory?

Mr. Alport: There is no question of child labour, so far as I am aware, but if the hon. Gentleman has any information which he would like to send to me, I should be glad to consider it. I hope at the same time that the paper concerned will publish the answer I have given.

Nathaniel Ramotala

Mrs. Castle: asked the Minister of State for Commonwealth Relations whether he is aware that Nathaniel Ramotala, a British-protected person from Basutoland, now living in South Africa, has been arrested by the South African police; and whether he will take steps through the High Commissioner, to secure his immediate release.

Mr. Alport: One N. Ramotala has been detained in the Union of South Africa under the Emergency Regulations. The High Commissioner is making inquiries as to his citizenship status.

Mrs. Castle: I thank the Minister for that reply. Is be aware that, according to a very reputable source of information in South Africa, which I am not at liberty to disclose to him for fear of victimisation, this man has never been involved in African politics and that at the time of his arrest he was ill with a heart attack at his home in Johannesburg? Is the Minister aware that his detention has spread fear among other British protected persons in the Protectorates? Will he, therefore, get some general agreement through the High Commissioner with the South African Government that British protected persons shall not be detained in this way as a by-product of South African policy?

Mr. Alport: The hon. Lady will remember that I have said on a previous occasion that it is important to establish the status of the individual concerned. I am not aware of the details which the hon. Lady has now given but, as soon as it is established that the man in question is either a United Kingdom citizen or a British protected person, I can assure her and the House that a representative of the High Commissioner will visit him as soon as possible.

Mr. Marquand: May I ask haw many British protected persons are still under arrest and how many have been released since I last asked about these people?

Mr. Alport: I should be obliged if the right hon. Gentleman would put down a Question so that I may give him the latest and up-to-date information. I do not think we have any information that there has been any substantial increase in the numbers which I gave previously.

Oral Answers to Questions — UNION OF SOUTH AFRICA

Newspaper Correspondents, United Kingdom

Mr. Stonehouse: asked the Minister of State for Commonwealth Relations what facilities are provided by his Department for correspondents of South African newspapers in the United Kingdom to obtain full access to official information; and to what extent these facilities are arranged on a basis of reciprocity.

Mr. Alport: Access to official information is provided by the News Department of the Commonwealth Relations Office for correspondents of South African newspapers in the United Kingdom on exactly the same basis as for other United Kingdom, Commonwealth and foreign correspondents. These facilities are not arranged on a basis of reciprocity.

Mr. Stonehouse: I thank the Minister for the answer to the first part of the Question, and hope that these facilities will be continued. Is he aware that there has been some disgraceful treatment of British newspaper correspondents in the Union? In particular, is he aware of the case of Miss Blomberg, who was released from prison on condition that she no longer acted as correspondent for the Daily Herald? Will he make representations to see that this intimidation is brought to an end?

Mr. Alport: So far, neither my noble Friend nor I have received complaints on this subject from British correspondents, but if the hon. Member will let me have further details of specific cases I will look into them. It is important that correspondents of all Commonwealth countries should have ready access to all the sources of information that are available with regard to our views in the United Kingdom.

Oral Answers to Questions — PAKISTAN

Financial Assistance

Mr. A. Roberts: asked the Minister of State for Commonwealth Relations what representations have been made to the United Kingdom Government by the Government of Pakistan for financial assistance to overcome their economic difficulties.

Mr. R. Thompson: Mr. Shoaib, the Pakistan Minister of Finance, discussed with my right hon. Friend the Chancellor of the Exchequer, the question of future United Kingdom financial assistance for Pakistan during his recent visit to London. My right hon. Friend undertook to examine the matter and this is now being done.

Mr. Roberts: Does the hon. Member realise the importance of the economic stability of both Pakistan and India? As the unification of this part of the world might produce a favourable outlook towards the Western part of Europe, may I take it that the generosity shown to Pakistan will be equal to that which is being shown to her neighbour?

Mr. Thompson: I am obliged to the hon. Member. We should not lose sight of that fact. As I have just returned from a visit to Pakistan, those considerations will be in my mind.

Mr. F. M. Bennett: Will not my hon. Friend agree that this is a particularly appropriate time for seeing what else we can do to help Pakistan, in view of the fact that it has now managed to achieve a creditable degree of political stability, which provides a sure foundation for wide investment in that country?

Mr. Thompson: Yes.

Oral Answers to Questions — COMMONWEALTH RELATIONS

International Situation

Mr. Sorensen: asked the Minister of State for Commonwealth Relations if he will consult Commonwealth Governments in respect of joint Commonwealth appeal or action to be taken in respect of the international situation resulting from the recent failure to hold a Summit Conference.

Mr. Alport: We have, of course, kept in close touch with Commonwealth Governments over the recent events in Paris and will continue to do so as the international situation develops. I do not feel that action of the kind the hon. Member contemplates would be appropriate at the present time.

Mr. Sorensen: Will the hon. Gentleman look at this matter again, and also bring the idea to the attention of the Prime Minister, particularly in view of


the statement made by Sir Claude Corea only a short time ago? Would it not be highly desirable if the Commonwealth itself and the Union of South Africa would take this action, and would it not have a very beneficial effect at the present time?

Mr. Alport: I think that any collective action would be a matter for agreement amongst the Commonwealth Governments concerned, but the hon. Gentleman will recollect a statement made by my right hon. Friend the Prime Minister last Friday, and I think that he will see in it that any action which would be conducive to an improvement in the situation is one which would not be excluded by my right hon. Friend.

Human Rights

Mr. Hector Hughes: asked the Minister of State for Commonwealth Relations if he will take steps to invite British Commonwealth countries to a further Commonwealth Conference to resume consideration of the inconclusive talks in London recently on the subject of human rights and liberties.

Mr. R. Thompson: No, Sir. In any case, I cannot accept the hon. Member's description of what took place at the recent Commonwealth Prime Ministers' Meeting.

Mr. Hughes: Does not the Minister agree that the Commonwealth Conference is one of the most constructive links in the Commonwealth, and that the recent conference was largely frustrated by a concentration on one particular problem, which was left unresolved? Would it not, therefore, be a beneficial thing, in the interests of Commonwealth solidarity, to enable the Conference to reassemble to resolve that particular problem, as well as other outstanding problems?

Mr. Thompson: I would certainly accept all that the hon. and learned Gentleman has said about the importance and prestige of the Commonwealth Prime Ministers' Conference, but it is not for us alone to reconvene this body. I do not see that it is up to me to put any fresh gloss on the communiqué which ten of the world's most distinguished men agreed to at the end.

Mr. Fernyhough: If the hon. Gentleman cannot accept my hon. and learned Friend's version of what took place at the Commonwealth Prime Ministers' Conference, would he accept the version of the Prime Minister of Ghana or that of the Prime Minister of Malaya?

Mr. Thompson: I am concerned with the communqué, which I think is a very reasonable document to rest on.

Oral Answers to Questions —  EDUCATION

Teacher Training

Mr. Boyden: asked the Minister of Education if, in view of the success of the Leeds Day Training College in recruiting 100 candidates for teaching above the normal age for training college recruitment, he will establish a day training college for mature students in every region of England with a comparable population catchment area.

The Minister of Education (Sir David Eccles): Yes, Sir, wherever this is possible. Our aim is to establish day training facilities in the most populous areas to attract older students.

Mr. Boyden: I thank the Minister for some progress in that direction. Is he aware that last year about a thousand men suitable for training were not able to get into training colleges, and that probably there are many hundreds, possibly several thousands, of mature students willing and able to take advantage of day training facilities? Will the right hon. Gentleman press on with the programme with maximum speed and energy?

Sir D. Eccles: I will, and I hope before long to announce the names of the new colleges.

Mrs. White: Is it not true that the Minister is relying largely on mature students for 1962 when there will be no three-year students coming out of the training colleges, and ought not these colleges to have been ready for the coming September term?

Sir D. Eccles: Some of them are and a number of students are already coming forward. I hope very shortly to announce the names of five colleges.

Secondary Modern Schools (G.C.E. Examinations)

Mr. Swingler: asked the Minister of Education what steps he is taking to ensure that, where secondary modern school pupils, at their own or their parents' request, wish to sit for the General Certificate of Education examination, they are enabled to do so.

Sir D. Eccles: We are improving the staffing and premises of the secondary modern schools so that increasing numbers of pupils may have the opportunity of taking G.C.E. and other extended courses. It is for head teachers to say what examination a pupil should attempt.

Mr. Swingler: I applaud the progress made in secondary modern schools to enable pupils to take the G.C.E. Is the Minister aware that there are still complaints from some areas that parents who desire their children attending secondary modern schools to take subjects for G.C.E. find that they are prevented from doing so by the local education authority? Will the Minister exercise some influence over the local education authorities in order to ensure that a higher number of secondary modern schools put in pupils for the G.C.E.?

Sir D. Eccles: The local education authorities must make what they consider to be the best use of the teachers available. If the hon. Member would like to send me any information of cases which he has, I will look into them.

Public Library Service

Mr. Braine: asked the Minister of Education whether he will take into account the views expressed to him by the Urban District Councils' Association before implementing that recommendation of the Roberts Committee on the structure of the public library service in England and Wales which will prohibit a borough or urban district from becoming a library authority unless it has a population of 50,000.

Sir D. Eccles: Yes, Sir.

Mr. Braine: Will my right hon. Friend bear in mind that it was—I hope it still is—Government policy to devolve responsibility on the lower tiers of local authority, and in that connection will he

bear in mind that there is a large number of authorities in this country with populations near, and perhaps under, 50,000 which have the will and enthusiasm to become library authorities?

Sir D. Eccles: I will, and I am now beginning my conversations with the local authority associations on this matter.

Mr. Greenwood: Can the right hon. Gentleman say when he expects to be able to introduce legislation on the subject, and can he ensure that the House has an opportunity of discussing it before he does so?

Sir D. Eccles: The answer to that depends on how well I get on in my conversations with the local authorities. I am as anxious as the hon. Gentleman that we should press this matter to a conclusion.

Graduates (Qualified Teacher Status)

Mr. Montgomery: asked the Minister of Education the number of graduates who have been refused the status of qualified teacher in each of the last five years, after having failed to obtain a diploma in education.

Sir D. Eccles: The numbers are as follows:

1955
…
…
…
…
51


1956
…
…
…
…
83


1957
…
…
…
…
26


1958
…
…
…
…
40


1959
…
…
…
…
32

Mr. Montgomery: Do I understand that this implies that a person who has graduated and goes straight to a university is classified as a qualified teacher but a graduate who stays on for an extra year, and tries to achieve a diploma in education and fails, is classified as an unqualified teacher and paid accordingly? If that be so, will my right hon. Friend rectify that anomaly?

Sir D. Eccles: It appears anomalous, but the numbers are small and refer to teachers who in the opinion of the training institute concerned were not suited to teach at all.

Mr. Montgomery: In view of the unsatisfactory nature of that reply, I beg to give notice that I shall endeavour to raise the matter on the Adjournment.

Male Teachers (Resignations)

Mr. Montgomery: asked the Minister of Education the number of men who have left the teaching profession to take up other work in each of the last five years.

Sir D. Eccles: The first years for which figures are available are the two years ending March, 1958, in which 4,750 men left contributory teaching service other than on grounds of age or infirmity. In the same period 2,100 returned. Figures for later years are not yet available.

Mr. Montgomery: Does not the Minister feel that those figures give cause for concern? Would not he agree that one of the great grievances of men leaving the teaching profession is the small salary paid to them, and has he any plans for rectifying this situation?

Sir D. Eccles: I cannot agree with my hon. Friend. As a matter of fact, these wastage figures are very good, because, as my hon. Friend will know, a large number of teachers leave contributory service in order to teach in independent schools.

Dr. King: Can the Minister give comparable figures regarding women teachers who have left the profession? Can he assure the House that the proportion of men to women teachers remaining in the profession has increased during the period?

Sir D. Eccles: Without notice, I cannot give the figure for women, but the wastage figure is much greater than for men. It is true that the proportion of men in service has steadily increased. The number of men teaching has increased by 14 per cent. since 1956.

School Dentists, West Riding

Mr. D. Griffiths: asked the Minister of Education the number of full-time county school dentists in the West Riding of Yorkshire in each year from 1954 up to the latest available date.

The Parliamentary Secretary to the Ministry of Education (Mr. Kenneth Thompson): I would refer the hon. Member to the Answer given on 19th May to the hon. Member for Pontefract (Mr. Sylvester).

Mr. Griffiths: While thanking the hon. Gentleman for that reply, which he gave to my hon. Friend the Member for Pontefract (Mr. Sylvester) and which was totally unsatisfactory, may I ask him to ask his right hon. Friend at least to do something about this matter rather than to offer us platitudes? Is it not a shocking disgrace that in the twentieth century in the West Riding of Yorkshire, which is proclaimed to be one of the most progressive local authorities, there are many places in which there is not a one day a week school dental service?

Mr. Thompson: I fully endorse the hon. Member's description of the West Riding authority. It is doing its best to recruit more dentists for the school dental service, but it is faced with the problem, common to all authorities at the moment, that dentists are very hard indeed to come by.

Training Colleges (Places)

Mr. Boyden: asked the Minister of Education how many men and women applicants, respectively, for admission to training colleges in September, 1960, have not yet secured places; and how many places in training colleges still remain vacant for this date.

Sir D. Eccles: About a thousand places, two thirds of them for women, have not yet been filled. I am glad to say that the number of candidates still being considered is substantially higher but I have no precise figure.

Mr. Boyden: May I ask two supplementary questions? Would the right hon. Gentleman consider sending out another circular to training college principals asking them to make more arrangements for boarding out teachers and, on his side, providing a staff ratio of one in ten and finance to deal with the matter? Will he make arrangements in the 250-odd surplus places in domestic science colleges for the boarding of ordinary teachers and for their teaching?

Sir D. Eccles: In reply to the first part of that supplementary question, I have asked training colleges to do their best and I anticipate that they will be taking a record number this year. That is very good, considering how full they were last year. In reply to the second part of the supplementary question, I am obliged to the hon. Member for the suggestion and I shall look into it.

Mr. Greenwood: When will the right hon. Gentleman let us know the details of his plan to provide an additional 8,000 educational places in training colleges, and what form that will take? Will it be in the form of a White Paper or a statement in this House?

Sir D. Eccles: I am sorry, but I am not ready yet. I am working on it, but it is a very big operation to provide 8,000 places on top of the 16,000 which we are planning now.

Overseas Students' Residential Schools (Inspection)

Mr. Mayhew: asked the Minister of Education how many residential schools for overseas students are inspected by his Department.

Sir D. Eccles: At their request, five residential establishments which provide courses for overseas students over compulsory school age have been inspected by Her Majesty's inspectors and been recognised by my Department as efficient.

Mr. Mayhew: What about the other residential schools? Is the right hon. Gentleman aware that a number of these schools which have foreign students take advantage of the fact that parents cannot easily check up on them and are charging very high fees for poor food conditions and tuition? Would he agree that it is of the greatest importance to ensure that students who come to this country are property and fairly looked after?

Sir D. Eccles: I agree with the last part of the hon. Member's supplementary question. While not accepting his description of these residential colleges, the fact is that I have no power to arrange for an inspection of independent establishments providing courses solely for students over compulsory age unless they ask me to do so.

U.N.E.S.C.O. (Resolution)

Mr. Brockway: asked the Minister of Education the terms of the resolution on the practice of apartheid in South Africa considered by the recent United Nations Educational, Scientific, and Cultural Organisation conference; which delegations voted in favour of and against the resolution; and the reasons for the vote of the British delegate.

Sir D. Eccles: The resolution submitted to the Executive Board of U.N.E.S.C.O. was not specifically concerned with apartheid, but with the recrudescence of racial hatred in many regions. An amendment was proposed mentioning South Africa; the United Kingdom's representative voted against it on the ground that a reference to a specific instance would place the resolution beyond the proper scope of the Organisation. Subsequently, when the amended resolution was put to the vote the United Kingdom's representative abstained for the same reason. The voting on the amended resolution was: for, 16; against, none; abstentions, 5. Three members did not participate in the vote. The individual voting is not recorded. I am sending the hon. Member a copy of the final form of the resolution.

Mr. Brockway: While thanking the right hon. Gentleman for that very full reply, may I ask if he would agree that it is disgraceful that the British vote in an international organisation should not be given against racial discrimination in education, which reaches its climax in South Africa? Is it not the case that the Bantu Education Act means that the great majority of African children are educated only to the scale of being wretchedly paid manual labour?

Sir D. Eccles: I have sympathy with what the hon. Member says, but the resolution would have been carried unanimously and done much more good, in my judgment, if an amendment had not been moved citing a particular country. I think it a pity that that was done.

Building Programme, Durham (Secondary Modern Schools)

Mr. Blyton: asked the Minister of Education which secondary modern schools submitted by the Durham Local Authority for inclusion in its 1954–55 building programme were not approved for inclusion by his Department.

Sir D. Eccles: One at Peterlee and the other at Barnard Castle. In fact, only four out of the ten projects approved for that year were started on time.

Mr. Blyton: Could the Minister tell me how many denominational schools needed reorganisation in Durham and how much it would have cost in 1954–55?


When he made the recent attack on Durham County Council was he attacking their efforts as well?

Sir D. Eccles: I shall have to ask the hon. Member to put down a Question about the number of denominational schools, because I do not carry the figures in my head.

Mr. Blyton: asked the Minister of Education why the Telling Heworth, the Hartlepool, West View and the Birtley/Chester-le-Street secondary modern schools were not included in the Durham Local Education Authority's building programme 1955–56 although submitted for inclusion by the Durham Local Education Authority.

Sir D. Eccles: Because twelve other projects were considered to be more urgently needed. Of these twelve, only one was started on time.

Mr. Blyton: Could the Minister tell me what his inspectors' comments were on the state of overcrowding in Durham, the Hartlepool and Birtley areas, and the difficulties which teachers are experiencing in those areas? Does he not consider that, in the light of the fact that his Department has cut the programme for Durham County Council over the last seven years, he should be decent and apologise to Durham County Council?

Sir D. Eccles: I shall write to the hon. Member about what Her Majesty's inspectors have said, but of course it is very true that the delays in the building programme have added to the difficulties.

Mr. Stones: asked the Minister of Education which secondary modern schools submitted by the Durham Local Education Authority for inclusion in its 1956–57 building programme were deleted by his Department.

Sir D. Eccles: Nine schools, at Hartlepool, Stockton, West Auckland, Egglescliffe, Peterlee, Spennymoor, Durham, Ushaw Moor, and Seaham Harbour. The large carry-over of unstarted projects from the previous year's programme made it necessary to introduce a starting date procedure. As a result, only two out of nineteen approved projects were started in 1956–57.

Mr. Stones: Will the right hon. Gentleman tell the House how many

all-age schools would have been eliminated had he been prepared to accept the modern school building programme of the county council?

Sir D. Eccles: It is no good accepting a programme if the authority does not carry it out.

Mr. Stones: asked the Minister of Education how many secondary modern schools were deleted from the Durham Local Education Authority's building programme for 1957–58 by his Department; and what percentage these schools formed of the number of secondary modern schools submitted by Durham that year.

Sir D. Eccles: Fifteen proposals were submitted of which twelve, or 80 per cent., were not approved.
The large carry-over of unstarted projects from the previous year's programme made it necessary to continue the starting date procedure introduced a year earlier. As a result, only one out of three approved projects was started in 1957–58.

Mr. Stones: Does not the right hon. Gentleman agree that the replies to my Questions are a sufficient indication in themselves of the determination of the Durham County Council—[Laughter.]—to make up the leeway which occurred during the depression years between the two world wars? Is it not a fact that a Tory Minister is holding the county council back to some extent?

Sir D. Eccles: If the hon. Member is patient he will see that the story gets better.

Mr. Fernyhough: asked the Minister of Education the names of the secondary modern schools submitted by the Durham Local Education Authority for inclusion in its 1958–59 building programme and deleted by his Department.

Sir D. Eccles: Five schools, at Billing-ham, Peterlee, Ryton, Stockton and Whickham. At that time there were large arrears of earlier projects not yet started, but during the year the Authority began to make better progress. It started six out of sixteen approved projects.

Mr. Fernyhough: Is it not true, even though hon. Members opposite may


laugh, that Ministers of this Administration have deliberately forbidden local authorities to go ahead with school building and that there was a period when this Government called a moratorium on it? Ought not the Minister, occupying his present office, to accept the responsibility for the shortfall in his Administration rather than blame it on people whom he denied the opportunity to do the job when they wanted to do it?

Sir D. Eccles: I think that the hon. Member will agree that if the Minister gives the local authorities schools to build, it is then up to the local authority to build them.

Mrs. White: Surely it is not as simple as all that. If the Minister says that the arrangements in this county have not been satisfactory, he has a staff, including architects and inspectors, and it is surely his responsibility at the Ministry of Education, if he thinks that there are these difficulties, to make certain that something is done to put them right.

Sir D. Eccles: They are getting much better. If Question No. 51 is reached the hon. Lady will see the result.

Mr. Fernyhough: asked the Minister of Education what percentage of the Durham Local Education Authority's secondary modern school building programme, 1959–60, was deleted by his Department.

Sir D. Eccles: Twelve projects were submitted, of which seven, or 58 per cent., were not approved. Despite improved progress, seven projects from previous years remained unstarted in April, 1959.

Mr. Fernyhough: May we have an assurance from the right hon Gentleman that next year when we ask similar Questions he will not blame us for not building the schools which he would not give us permission to build this year?

Sir D. Eccles: I 'had very much hoped that Question No. 51 would be reached, because from the reply to it the hon. Member will get comfort. He will see that the Durham authority is now building very much better.

Mr. Greenwood: Is it not a fact that, in spite of all the Minister's jibes, the provision of additional school places in

the last five years in Durham has been very satisfactory?

Sir D. Eccles: I am not jibing at the county council. I have been asked for information, which I have given.

Mr. Turton: Can my right hon. Friend say how this Durham record compares with the record of the neighbouring North Riding County Council?

Sir D. Eccles: I should have to look into that.

Mr. Chetwynd: As one of the Members very closely affected by this, may I give notice that I shall do my best to raise the matter on the Adjournment?

Oral Answers to Questions —  ATOMIC ENERGY

Materials (Supply)

Mr. Warbey: asked the Minister of Education, as representing the Minister for Science, what steps he is taking to ensure that the Atomic Energy Authority will in future be able to obtain supplies of essential materials, such as chemicals, on less onerous terms than those referred to in the Comptroller and Auditor General's Report on the authority's balance sheet.

Sir D. Eccles: I would refer the hon. Member to my reply to the hon. Member for Newton (Mr. Lee) of 12th May.
In general, the Authority does not have the same difficulty in obtaining supplies of essential material as it did in the particular case referred to in the Comptroller and Auditor General's Report.

Mr. Warbey: Can the right hon. Gentleman give the House the name of the chemical manufacturer which has used its position as a powerful private monopoly to hold the public interest to ransom? Do not the strictures of the Comptroller and Auditor General in this case constitute an overwhelming argument, either for the nationalisation of the manufacture concerned, or for allowing the A.E.A. itself to manufacture its own vital supplies?

Sir D. Eccles: I cannot accept all that the hon. Member has said—indeed, any of it—but the name of the firm is Imperial Chemical Industries.

Oral Answers to Questions — SCIENTIFIC AND INDUSTRIAL RESEARCH

Industry (Research and Development)

Mr. Jay: asked the Minister of Education, as representing the Minister for Science, how much of the £300 million spent by industry in 1958 on research and development was out of public funds; and how much of the total £300 million was for research and how much for development.

Sir D. Eccles: The total proportion out of public funds is estimated to be a little more than half, but exact figures are not available. It is not possible to make an apportionment as between research and development.

Mr. Jay: Does the right hon. Gentleman realise that it means that industry, out of its own funds, is spending three times as much on advertising as on research? Does he think that these are satisfactory figures, and have the Government no responsibility here?

Sir D. Eccles: I have no responsibility for the advertising expenditure of industry, but I can say on behalf of my noble Friend that an important change has taken place in recent years, both in the total amount of money spent on research and the amount of that total supported by private funds.

Viscount Hinchingbrooke: Is my right hon. Friend aware that the House and the country are largely in the dark about the criteria which have to be satisfied before the State steps in and pays for research and development conducted by private industry? Will he consider stating—either by circulating the details in the OFFICIAL REPORT, or putting a copy in the Library—the principles by which his Department has acted in this matter?

Sir D. Eccles: I shall certainly refer to my noble Friend what my other noble Friend has said.

Mr. Jay: Is it not true that while expenditure on research is rising, expenditure on advertising is rising even faster?

Sir D. Eccles: I am afraid I have no information on that.

Oral Answers to Questions — NATIONAL BROADCASTING COUNCIL FOR WALES (CHAIRMAN)

Mr. G. Thomas: asked the Prime Minister (1) on what date the new Chairman of the Welsh Council of the British Broadcasting Corporation will begin his duties; and
(2) when he expects to announce the name of the new Chairman of the Welsh Council of the British Broadcasting Corporation; and whether he intends to open this appointment to Welshmen who speak English only.

The Prime Minister (Mr. Harold Macmillan): The term of appointment of the member of the British Broadcasting Corporation who is the National Governor for Wales and also Chairman of the National Broadcasting Council for Wales expires on 30th June.
It is not a condition of appointment that the person selected should speak Welsh.

Mr. Thomas: Is the Prime Minister indicating that he will soon announce the name of the person appointed to follow Lord Macdonald? Secondly, in making this appointment, will he bear in mind that the Welsh people will be very disappointed if he tries to push on to us one of his disused Tory slag heaps, if I may use one of his own expressions?

The Prime Minister: I hope that the appointment can be made very shortly, at any rate in time before the resignation of the present holder takes effect.

Mr. J. Griffiths: Will the Prime Minister bear in mind that, though the knowledge of Welsh may not be a condition of the appointment, it will be an advantage to the Chairman of the Council to listen to and understand the Welsh programmes for which he is responsible?

The Prime Minister: Yes, I quite understand that. It is one of the considerations which we must take into account.

Mr. Morris: Will the Prime Minister bear in mind in making the appointment that the Chairman should be a person with full knowledge of the cultural and educational needs of Wales?

The Prime Minister: Yes, Sir. I think that that is the most important aspect to take into account in making the appointment.

Oral Answers to Questions — EUROPEAN FREE TRADE ASSOCIATION AND COMMON MARKET

Mr. Wyatt: asked the Prime Minister whether the speech of the President of the Board of Trade on 21st May regarding negotiations between the Outer Seven and the Common Market countries, and the possibility of a customs union, represents the policy of Her Majesty's Government.

The Prime Minister: My right hon. Friend the President of the Board of Trade did not make a speech on 21st May. He was asked by a reporter at London Airport whether he would comment on the suggestion that the countries of the European Free Trade Association should join a Customs Union. He replied,
Yes, indeed. We are perfectly willing to negotiate, but what the final outcome will be we cannot say".
The first part of this answer meant only that he was prepared to comment. There was nothing in what he said which was contrary to the policy of Her Majesty's Government.

Mr. Wyatt: After that meaningless mumbo-jumbo of qualified qualification—[HON. MEMBERS: "Withdraw"]—will the Prime Minister—

Mr. Speaker: Order. We must hear what the question is.

Hon. Members: Why?

Mr. Wyatt: Perhaps I may begin again. After that meaningless mumbo-jumbo of qualified qualification, will the Prime Minister say whether it is his intention that Britain should join in a Customs Union with the Common Market and what he is doing about it?

The Prime Minister: I do not understand this language, which may be more suitable for Hampstead than for the House of Commons. We joined in association with six other countries in what is known as E.F.T.A. We hope to negotiate with the Six, and the Lisbon meeting was preparatory to that. The communiqué issued after the meeting said

that the Governments of the member countries with whom we are close associates—all of them—will approach the negotiations with the Trade Committee in Paris in a constructive spirit and that they believe that, with willingness to compromise on both sides, these negotiations should make it possible to settle the problems created by the existence of the two bodies. It is in that spirit that the next meeting will be held in June.

Mr. Gaitskell: Whether or not it is mumbo-jumbo, does the Prime Minister appreciate that it is very difficult for any of us to follow exactly what is happening in these negotiations? May I ask him this straight question: is it still the Government's policy that this country should not enter the Common Market?

The Prime Minister: It is the Government's policy, having signed and agreed an association with six other countries, to act in conjunction with them, and only with them.

Mr. Gaitskell: I am sure that we are glad to have that assurance, but the Prime Minister has not answered my question. Supposing the Seven decided in their consultations that they wanted to go into the Common Market, what would the attitude of the Government be?

The Prime Minister: Supposing the Seven decided, that, of course, would include Great Britain.

Mr. Grimond: What specific proposals is this country making to the Seven? For instance, are we proposing to the Seven that they should join the Common Market or not?

The Prime Minister: No. We are working out our approach with them. We have the very encouraging fact that the Six have now said that they would like to negotiate. We hope that they will soon be making specific proposals upon which negotiations between the two bodies could be made. I can imagine nothing worse than for us to give the impression that, having signed this agreement with our six friends, we were going to run out and try to make an agreement of our own.

Mr. Gaitskell: It is precisely because that impression has been created by various newspaper reports that I asked the question.

The Prime Minister: I can only describe that "impression" as mumbo-jumbo, if I am allowed to do so.

Mr. S. Silverman: On a point of order. For the guidance and information of the House, Mr. Speaker, would you explain how all this last series of supplementary questions and supplementary answers arose out of the Question of my hon. Friend the Member for Bosworth (Mr. Wyatt) about the speech which the President of the Board of Trade did not make?

Mr. Speaker: It seemed to be a declaration of policy which was not a declaration, and we were investigating matters in relation to the policy which was not declared.

BUSINESS OF THE HOUSE

Mr. Gaitskell: May I ask the Leader of the House to state the business for next week?

The Secretary of State for the Home Department (Mr. R. A. Butler): Yes, Sir. The business for next week will be as follows:

MONDAY, 30TH MAY—Consideration of the Motion standing in the name of the hon. Gentleman the Member for South Ayrshire (Mr. Emrys Hughes) relating to Mr. Speaker and the rights of Members.

Afterwards, a debate will take place on Foreign Affairs on the Motion for the Adjournment of the House.

TUESDAY, 31ST MAY—Committee stage of the Finance Bill.

WEDNESDAY, 1ST JUNE—By agreement through the usual channels, the Adjournment of the House will be moved at the beginning of business in order to debate, until six o'clock, the Government's measures concerning road traffic at Whitsun.

Afterwards, we shall take the Report and Third Reading of the Road Traffic and Roads Improvement Bill; and consideration of the Motion to approve the Import Duties (Chemicals) Order.

THURSDAY, 2ND JUNE—Consideration of Lords Amendments to the Civil Aviation (Licensing) Bill and the Payment of Wages Bill.

Report and Third Reading of the Caravan Sites and Control of Development Bill.

FRIDAY, 3RD JUNE—Adjournment for the Whitsun Recess until Monday, 20th June.

Mr. Gaitskell: First, is it intended that the Minister of Transport will open the debate on road traffic with a statement of his proposals for the handling of traffic during Whitsun, or will he make a statement before the debate so that we can be informed about it before discussion begins? Secondly, when does the Leader of the House propose to find time for a debate on Commonwealth affairs, for which we have pressed on several occasions? Thirdly, when are the Government likely to make a statement on the very unsatisfactory state of negotiations in Cyprus?

Mr. Butler: In reply to the right hon. Gentleman's first point, two Orders will be laid, which should appear on the Order Paper tomorrow, about my right hon. Friend's activities and suggestions after Whitsun. I think that he would normally make a statement at the beginning of the debate. That, taken with the Orders—his statement will be wider than the Orders—should give the House some idea of what he has in mind.
I do not think that there will be an opportunity easily before the Whitsun Recess to have a debate on the Commonwealth, and I do not think that a debate on Cyprus would be useful until we have some further indication of how the discussions in Nicosia are going on.

Mr. Gaitskell: I do not ask for a debate. I asked when the Government were likely to make a statement.

Mr. Butler: I do not think that a statement can be made until we have made some further progress with the negotiations.

Mr. W. Hamilton: Has the right hon. Gentleman given any further attention to the possibility of a debate on the Motion now on the Order Paper, and signed by every Scottish Labour Member, on the question of unemployment in Scotland? Is the right hon. Gentleman aware that, whilst the figures have gone down this month, this is what one could expect in view of the normal seasonal


trend? The position is still very serious. Will he give further consideration to it?
[That this House, while welcoming the efforts being made to induce development of private industry in areas of high unemployment, believes that where those efforts prove insufficient it is the duty of Her Majesty's Government to bring full employment to those areas by setting up and operating publicly owned enterprises.]

Mr. Butler: I am very glad to say that the figures have improved, as the hon. Member has acknowledged. That is for the good. I agree that the problem remains one worthy of discussion, but I cannot enlarge upon the opportunities which I have previously announced upon which a discussion might take place.

Dame Irene Ward: Will my right hon. Friend arrange for a debate on the Chandos Report to the Minister of Transport, as I understand that it has been announced in Scotland today that the keel of the Cunarder is to be laid in John Brown's? Is it not appropriate that a proper statement giving the full details of the future should be announced to the House of Commons before it appears in the Press in Scotland?

Mr. Butler: Yes, Sir. It is natural that my hon. Friend should wish to have the latest news, but she must give my right hon. Friend an opportunity to consider the Report, which he has only just received. There is no question of any decision having been made. Any announcements which have been made about a decision are premature.

Mr. Rankin: In view of the right hon. Gentleman's continuing difficulty in finding time to debate very important issues, such as Scottish unemployment, how is it that he can afford such a long time for a holday at Whitsun?

Mr. Butler: It has been normal in recent years to permit the House of Commons an opportunity for a fortnight's Recess at Whitsun. Owing to the extreme efficiency and despatch with which Government business has been transacted, we can well afford to permit hon. Members opposite a little relaxation, in which they can examine the sorry state of affairs in their own constituencies.

Mr. Nabarro: Could not my right hon. Friend consider during the Whitsun Recess the matter put to him by my hon. Friend the Member for Tynemouth (Dame Irene Ward)? Could not the Minister of Transport consider the Chandos Report before 20th June, and could my right hon. Friend then arrange a debate on this very important topic in conjunction with the Galbraith Report on nuclear-powered merchant ships, which is of general interest to the whole House?

Mr. Butler: I will certainly draw to my right hon. Friend's attention the importance of reaching a decision on these matters in time for the House to have an opportunity of expressing its opinion.

Mrs. Castle: Can the Leader of the House say when he will announce his proposals on the setting up of a Select Committee on Accommodation? Is he aware that it took us months to get a debate and that we have had to wait for months for any action from that debate? He and the Minister of Works have been sitting on their plans like a mallard duck, except that they have not hatched out any eggs.

Mr. Butler: Most of the mallard ducks of my acquaintance have now produced some young. The hon. Lady will be glad to hear that I have submitted to Mr. Speaker the terms of reference of the Committee which we wish to set up, and that my right hon. Friend has produced his models and they are very nearly ready. I hope that the ducklings will shortly be available.

Mr. Emrys Hughes: is the Leader of the House aware that we greatly appreciate his generosity in giving us time on Monday for the discussion of the Motion in the names of my hon. Friends and myself?
[That this House views with regret the failure of Mr. Speaker on the occasion of the Prime Minister's statement on the failure of the Summit Conference to allow questions to be put by any private member not a Privy Councillor or Front Bench spokesman on the Opposition side of the House.]
As there is an important foreign affairs debate, and we understand that the Foreign Secretary wishes to go abroad, and a large number of hon. Members with all kinds of different points of view


wish to speak in the debate, we wish to say that we respond to that generosity and that we do not want any time from the right hon. Gentleman now.
I wish to say, also, that there is no imputation of impartiality against you, Mr. Speaker. [Laughter.] All that we wish to do is to live along with you in peaceful co-existence.

Mr. Speaker: May I be allowed, in response to thank the hon. Member for his discourtesy?

Mr. C. Pannell: Next Wednesday is Derby day. Does the Home Secretary appreciate the interest of my right hon. Friend the Member for South Shields (Mr. Ede) in that day, and the great hardship it imposes on him to be absent from another place on that afternoon? Cannot we get back to the time-honoured practice of Lord Roseberry, when the House adjourned so that Members might be on Epsom Downs studying the social habits of the people?

Mr. Butler: I think that that proposition would command universal support.

Hon. Members: No.

Mr. Greenwood: Will the Leader of the House say whether we are to have a statement next week on the Anderson Report, and, if not then, when?

Mr. Butler: I think that this is a matter to which my right hon. Friend must give his immediate attention. I shall endeavour to give the hon. Gentleman a reply as soon as possible, but there has not so far been an opportunity to give a final opinion on the Report.

Mr. Ede: Perhaps I may be allowed to say that the question put by my hon. Friend the Member for Leeds, West (Mr. C. Pannell) was put without consultation with me, and that satisfactory arrangements appear to have been made. May I congratulate hon. Members opposite on the fact that the Whitsun Recess has been so arranged as to include the whole of Ascot?

Mr. Harold Davies: In view of the international situation, could the House have a succinct White Paper on the Government's existing controls in relation to N.A.T.O. and our bases? Will the Leader of the House give an opportunity at some time for both sides to discuss this matter in a serious manner?

Mr. Butler: This is not quite a question on business, but I will refer it to my right hon. and learned Friend the Foreign Secretary; and perhaps the matter could be raised in the foreign affairs debate.

Mr. Fletcher: May I ask when the House will have an opportunity to consider the Report of the Simonds Committee on Powers of Subpoena of Disciplinary Tribunals, which has had a rather unfavourable Press? What are the Government's intentions in respect of that Report in so far as it relates to Bills now before the House?

Mr. Butler: I hope at an early date to give an Answer to Parliamentary Questions on this matter which will indicate the Government's attitude to the Simonds Report. I would not say that the reception had been bad; it has, in some respects, been confused, because there is more than one issue at stake. I think that what the House wants to get clear is what action the Government propose to take about a Bill at present in another place, and that I think I can make clear.

Mr. Mulley: May I ask the Leader of the House whether he has now had time to consider a question that I put earlier: will he find time to debate the important developments in Europe, particularly with regard to the economic problems and the formation of a new organisation to replace O.E.E.C.? If time for this cannot be found before Whitsun—as I understand—will the Leader of the House give an assurance that the House can debate it shortly after the Whitsun Recess?

Mr. Butler: In so far as certain aspects of this question affect foreign policy, there will be an opportunity to refer to them in the foreign affairs debate. In so far as it affects the final conclusion a Government policy in regard to this difficult matter, I think that a little more time would be a good thing, and that will in no way take away from the opportunities of the House to express an opinion.

Mr. Brockway: Is the Leader of the House now in a position to answer a Question I put to him a fortnight ago, when he said that he was prepared to


enter into discussions about time being allowed for consideration of the Race Discrimination Bill?

Mr. Butler: The answer is, No, Sir, not in the form in which it is at present presented.

Sir L. Plummer: The right hon. Gentleman will be aware that early in February the House gave me permission to introduce a Bill dealing with racial and religious insults. Owing to pressure of other business, and to long-winded speeches made on Fridays, that Bill has not got any further. In those circumstances, will the right hon. Gentleman say whether it is possible to give time for a Second Reading, particularly as I believe that the Government want to make clear their attitude to the problem?

Mr. Butler: I have no doubt about the hon. Gentleman's motives, but we think that this is not a matter that is easily handled by legislation. I cannot, therefore, give any undertaking.

Mr. Ronald Bell: Does my right hon. Friend think that he will be able to find time for a debate on the Cranbrook Report?

Mr. Butler: Well, Sir, I hope so.

Orders of the Day — FINANCE BILL

Considered in Committee [Progress, 25th May].

[Sir GORDON TOUCHE in the Chair]

Clause 30.—(RECEIPTS ACCRUING AFTER DISCONTINUANCE OF TRADE, PROFESSION OR VOCATION.)

3.46 p.m.

Mr. Geoffrey Stevens: I beg to move, in page 25, line 5, after "vocation" to insert:
of which the profits or gains are".
This is really a drafting error. I suggest that it is not possible to levy Income Tax on a trade, profession or vocation, but only on the profits or gains arising therefrom. For that reason, I hope that the Government will accept the Amendment.

The Economic Secretary to the Treasury (Mr. Anthony Barber): I agree with the purpose that my hon. Friend the Member for Portsmouth, Langstone (Mr. G. Stevens) has in mind, and also with the reasons that he has adduced in support of it. I would advise the Committee to accept the Amendment.

Amendment agreed to.

Mr. G. R. Mitchison: I beg to move, in page 25, line 14, to leave out from the beginning to "all" in line 16.

The Chairman: It might be convenient to discuss with this Amendment those in page 25, line 17, after "computing", to insert "by reference to earnings"; in line 18, to leave out "that period or any subsequent" and to insert "any"; and in page 25, to leave out lines 20 to 26.

Mr. Mitchison: As you have observed, Sir Gordon, these Amendments go conveniently together. The Clause is said by the rubric to deal with
Receipts accruing after discontinuance of trade, profession or vocation
We were told that it has been occasioned by two cases in which authors or artists, if I may use those words, had died, and the question arose whether or not they could be taxed on the earnings that accrued after their death. In those two


cases a noble effort was made to substantiate that what had originally been earnings had, by then, become the fruits of copyright, or something like that. The effort failed, and in both cases the decision was against the Revenue.
I shall refer to that in a little more detail in a moment, but perhaps we might first see what the Clause does, and what the effect of this Amendment is. Subsection (1) is not affected. Subsection (2) is the only subsection that is altered by this Amendment, and, if so altered, would read like this—and it may be for the convenience of the Committee if I read it out in that form:
Subject to the provisions of subsection (3) of this section, this section applies to the following sums arising from the carrying on of the trade, profession or vocation, that is to say"—
The Committee will notice that, so far, there has been no change, but the subsection would then go on to read:
all such sums in so far as their value was not brought into account in computing by reference to earnings the profits or gains for any period before the discontinuance
That would be the end of the amended subsection, and it is the only subsection amended.
The effect, as I understand it, is this. The subsection as it stands begins by applying its provisions to
"…profits or gains…computed by reference to earnings…"
In both the cases to which I have referred there was computation in that way. That means, of course, that the earnings for the fiscal year are estimated, whether or not they have been handed over in cash to the taxpayer. In an earlier case, this method was called by Mr. Justice Rowlatt "assessment by bookings", and I think that that is a simple way of looking at it.
The alternative method of assessment is to assess on a cash basis, that is to say, although the work may have been done in one fiscal year, the assessment is not made until the remuneration for the work comes in in cash to the taxpayer. We can call that the assessment by payments. Perhaps it would be convenient if we called the two methods assessment by bookings—"bookings" or "earnings", I mind not which, though "earnings" is the word used in the subsection—and assessment by payments.
Coming to the earnings assessment, we find it provided in paragraph (a) that the application is to all sums which arise from the carrying on of a trade, profession or vocation
in so far as their value was not brought into account in computing the profits or gains for that period or any subsequent period before the discontinuance
In the two cases referred to, it was discontinuance by death, but it could be discontinuance by retirement or abandonment of the trade or, of course, discontinuance by the trade ceasing to be carried on by one person and beginning to be carried on by someone else, whereupon, subject to some exceptions and other provisions in the Bill, the first person would discontinue.
We come now to payments, paragraph (b),
where the profits or gains for any period before the discontinuance were not so computed"—
that, I think, means, in effect, where the taxpayer was assessed on a payments basis—
any sums which, if those profits or gains had been so computed, would not have been brought into the computation for that period because the date on which they became due … fell after the discontinuance
I have omitted a few words, but I think that I have got the hang of it sufficiently, and I hope that I have explained my view of it to the Committee with as much clarity as is possible.
When one comes to the payments basis, the fact that the earnings were before the discontinuance is immaterial and on the payments basis a person who, by death or otherwise, gives up his vocation is no longer liable to pay tax on the fruits of his earnings before discontinuance. Obviously, he cannot do it when he is dead, but it refers, of course, to executors, as in the two cases I have mentioned. I trust that I have made the point tolerably clear and explained my view of it, at any rate.
I do not think that I need go into the details of the two decisions, except to mention one point. Both cases went to the House of Lords, and the earnings in both were held by the House of Lords to be assessable under Case II of Schedule D, which, broadly speaking, covers the earnings of professions. They were held not to arise from any property


in copyright or any contract with the publishers, publishers being concerned in both cases. That is the type of receipt that we are considering. It is true that Case I is mentioned, also, but for what I have to say now I think Case II is the one which matters.
I turn now to the effect of the Clause. When the Chancellor of the Exchequer introduced it, my right hon. Friend the Member for Huyton (Mr. H. Wilson) asked about lawyers. The Chancellor's reply was that he would see when the Bill came forward that they were a different matter. I will deal with the Bar for a moment. In respect of barristers, the assessment is invariably or almost invariably made on the payments basis. Accordingly, the position is this. Assume someone earning year by year at the Bar whatever it may be. His fees a re booked in the usual way by the clerk in his chambers. He then discontinues his profession. When he has so discontinued, notwithstanding that the fees have been booked and may actually be received, he will not be taxed on the fruits of those earnings.
On the other hand, if the taxpayer had been an artist or an author, as in the two cases which went to the House of Lords, then the taxation would be not on the payments basis but on the earnings basis and, accordingly, this Clause would now apply to him. Although, in the past, he would not have been liable for tax on the fruits of his earnings after discontinuance the effect of the Clause, broadly speaking, subject to some exceptions, would be to tax him on the fruits of his earnings.
I cannot believe that the Committee as a whole will feel that that either is fair or looks fair. We are dealing with cases which resemble one another in the type of thing which happens, the discontinuance by death or abandonment of a vocation of some sort. The distinction which is drawn by the Clause depends entirely, as I see it, on the difference between the two bases of assessment. The Government may say, "That may be so, but it is inevitable that members of the Bar"—they are not the only ones, but I take them as one instance—"should be taxed on payments and there are difficulties in dealing with their fees falling to be paid after they have given up the profession".
That may be said, but it does not appeal to the ordinary man, who will feel that there is no essential difference between the giving up of the profession of author and the giving up of a profession which, because of its character, has been assessed in a different way, and a difference in the form of assessment, whether necessary or not, should not be allowed to affect the merits of the decision we are invited to take.
Substantially, the merits of the decision seem to be that, where a man has been carrying on a trade, profession or vocation, and he ceases to carry it on, he should not thereby escape tax on what comes to him out of that trade, profession or vocation even though he has, in fact, discontinued. Of course, it is perfectly obvious that the Clause is introduced to deal, among other things, with abuses or possible abuses. Once one accepts the principle that discontinuance means no further liability for the fruits of previous activity, then, if one takes the simple case of a change in the identity of traders, one can easily have abuse, deliberate or other—and it can quite readily be deliberate.
I need not go into the matter in detail but it is quite clear that, if the business as a business remains substantially the same, and is passed from one person to another, then, without this Clause, there is a real risk of the Revenue being defeated in what is a right claim by a somewhat fictitious change, though a real one in the eyes of the law, in the identity of the trader. One can see that and there have been provisions in this correction dealing with changes in partnership with the same sort of point in mind.

4.0 p.m.

Mr. Stevens: I have no wish to dispute anything that the hon. and learned Member has said. I have followed his argument with much interest. It may well be that he will deal later with the question which I propose to ask him. I understand that the essential difference between a barrister and another person is that a barrister cannot sue for his fee and, therefore, the fee is not even a debt due to him. I believe that that is an important point.

Mr. John Diamond: Can my hon. and learned Friend say, out of his deep knowledge of the Bar,


whether a barrister is able to spend his fee although he cannot sue for it?

Mr. Mitchison: I think that the question of my hon. Friend the Member for Gloucester (Mr. Diamond) answers itself. I was proposing to deal with the point raised by the hon. Member for Portsmouth, Langstone (Mr. Stevens), but I cannot say that I regard it as a very substantial or essential one. I doubt whether the Government would wish to rely on it.
The words used are "becoming due", or "being ascertained as due", or something of that sort. It can be said that, technically, no barrister's fee ever becomes due. It is agreed, noted down and finally paid, but I do not think that one ought to found a substantial difference in the results of taxation on what is a very technical point depending on the inability of members of the Bar to sue for fees.
I believe that this does not only apply to barristers. I fancy that Fellows of the Royal College of Surgeons or, perhaps, the Royal College of Physicians are in the same position under a professional convention of some sort and that they never sue for fees, although whether any of them has tried to do so and been defeated I do not know.
I do not think that the Committee would want to come to a decision on a very technical matter which relates to another side of the activities of the Bar. However, I want to make this clear. I gave the Bar only as an instance and because I know a little about it, but the same sort of point may arise in connection with other professions. The substantial point, I think, is this: is it possible to assess these earnings in any other way than on a payment basis? In some cases it is very difficult.
I can think of cases in which it might be difficult, but I see no difficulty with regard to the Bar or, I imagine, with regard to most professional earnings. Earnings at the Bar normally are agreed before the work is undertaken. They are noted by the solicitor and the barrister concerned and they are then regarded as a debt of honour, subject to this, that the solicitor may not be able to recover from his client. That does happen and there would have to be adjustments, but I imagine that there

are always bound to be adjustments when one is assessing on an earnings basis. There are provisions for bad debts in the Income Tax Acts. I can see no great practical difficulty in the matter. I am told that it is not as easy as it looks and probably the Financial Secretary will tell me that it is much more difficult than I suppose. However, I must leave it to him to say so and to explain why.
What I read as an abbreviated Clause is, as a piece of legislation, clear enough. There is no doubt what it means. The difficulty may be administrative, but we have not only to do the right thing between one type of earnings and another but to appear to be doing it. It will be very unpopular and misunderstood in the country if we take steps to cover, let us say, authors and artists and leave out some of the other professions. It is something that we ought not to do if we can possibly avoid it.
If there are administrative difficulties, I cannot believe that they are insuperable, or that they are of a character that cannot be solved by suitable arrangements. It might be necessary further to amend the Clause or insert a further Schedule, but I doubt it. I should have thought that the right course was to accept the Amendments which simplify the wording of the Clause considerably and then to give effect to them even though it may be a little more difficult than to give effect to the Clause as drafted by the Government.
I appeal to the Government to look at this matter with an open mind and not to stick to what they have put in the Bill simply because they have put it in the Bill. There is a very strong case for the Amendments on grounds of fairness and of appearing to be fair. I am sure that the Financial Secretary will understand that I have no intention of stabbing my own profession in the back. I am very proud of the small part that I have had to play in it. I have always been very interested in it and have enjoyed it very much. I realise that the effect of these Amendments, if carried, will be to deprive the Bar of one fiscal advantage that they and perhaps other people have at present, but I do not think that when we are discussing fiscal provisions we ought to let that kind of thing weigh with us too much.
I cannot believe that the effect of a change of this sort would be to ruin the profession, or to deprive us of a proper judiciary in ten years' time. It might possibly have the result of making members of the Bar provide year by year for the payment of Surtax, and perhaps for their retirement, a shade more carefully than they do at present.
I have heard it said that the great defence of these payments being exempt from taxation is that they enable retiring barristers to pay their last year's Surtax. If that is so, it is a rather poor defence. The same sort of thing applies to people carrying on other vocations who are assessed on an earnings basis, but there is no reason why bad habits should not be changed if that is the right course.
I therefore repeat my entreaty to the Government to look at this matter with an open mind and to consider the broad merits of the case which I have put forward, and not to try to get out of fairness by raising minor points which they know can be met.

Mr. Eric Fletcher: I have some hesitation in intervening in this debate, because I have the highest regard for my hon. and learned Friend the Member for Kettering (Mr. Mitchison). He is a very distinguished member of the legal profession. I admire his courage in moving this Amendment, which is contrary to the interests of the profession of which he is such a distinguished ornament.
I am not entirely convinced by what he has had to say, and I am waiting with great interest to hear what the Financial Secretary has to say. But there are other considerations. I have given a great deal of thought to this question. I can understand that on certain general grounds there are arguments for bringing barristers into the same position as other persons with regard to receipts accruing after the discontinuance of their profession. The Royal Commission considered the matter in great detail, and, in paragraph 261, said that, on balance, it thought that the post-cessation receipts of a barrister were indistinguishable from similar receipts in other professions, and that they should be treated in the same way. There are, therefore, weighty arguments in support of the point of view put forward by my hon. and learned Friend.
I have no direct interest in this matter. I am merely a very humble member of the junior branch of the legal profession, and in that capacity I happen to have had some dealings with barristers—both Queen's counsel and junior—and I know the general prejudice that exists not only in the House of Commons but among the public, about the Bar. It is fair to observe that certain considerations should be borne in mind on the other side of the argument. The Bar of England, which has a very long history, has long enjoyed and suffered from the fact that its members can never sue for any fees due to them. It is true, not only technically but in practice, that all they receive by way of fees are honoraria. If their fees are not paid, there is no contractual basis which entitles them to recover those fees.
That is right, but it is important to stress the fact, because barristers are, therefore, in a totally different position from that of any other person in this country, whether he practises a profession, a trade or an occupation. Anybody else who is unpaid can sue for his fees and recover them.

Mr. Diamond: He can sue for them.

Mr. Fletcher: He can sue for them and recover them.

Mr. Diamond: If he is lucky.

Mr. Fletcher: I will just say this to my hon. Friend. The economic circumstances of today are such that very few contractual debts remain unpaid. During the inter-war years there were many bankruptcies and many cases of default by debtors, but today one of the things that distinguishes civilisation from the civilisation of the thirties is the fact that debts of all kinds are regularly and promptly paid. Speaking as a practising solicitor, I recall that before the war much of my time was occupied in pressing people to pay their debts. That does not happen today. Most people now pay their accounts almost as a matter of course, as soon as they come in.
There is one exception to that rule. Barristers are not paid regularly or promptly. Sometimes they are not paid at all. This may be a good or a bad system, but the Committee should at least acknowledge the fact that many barristers do a great deal of work for


which they are never paid and for which they have no legal right ever to recover payment.

Mr. Mitchison: In the same way as solicitors.

Mr. Fletcher: Yes, but I am now talking only of barristers. I am convinced that barristers suffer from a disadvantage as compared with all other members of the community, in that they cannot sue or recover fees due to them.
It is all very well for my hon. and learned Friend and other hon. Members to say that there is a moral obligation upon solicitors to pay banisters their fees, even in circumstances where the solicitor is unable to recover the money from his client and must, therefore, pay the barrister out of his own pocket. In the majority of cases when a member of the Bar knows that that is the position he neither insists upon nor expects the solicitor to pay those fees.
4.15 p.m.
I am not here to defend the present position in our legal profession. On more than one occasion, as the Attorney-General knows, I have said that the system is by no means perfect. I recognise that it has advantages, due to the great traditions of history, whereby barristers and Queen's counsel have a privileged position in the law courts. This is a great advantage for the community, since it constitutes a specialised class from which alone judges are selected. I acknowledge the great benefit which the community derives from the fact that we have a judiciary which is entirely independent of both Parliament and the Executive. That is something of which any student of our constitutional history should be proud.
But conditions are changing. Everyone knows that the legal profession is at present suffering from certain hardships. I am speaking now of barristers. Everybody knows that difficulty is being experienced in recruiting young men to the profession. I believe that the day will come when we will recognise that there are certain advantages in fusion between barristers and solicitors, and that we might have a system comparable with that which operates in the United States of America—which has a judicial system of which it can well be proud—and various Continental countries.
But for the moment we are wedded to a system which has endured for many years, one of the essential ingredients of which is that barristers can receive only honoraria, and cannot sue for fees. The risks involved in entering the profession at present are considerable.

Mr. Gordon Walker: If it is argued that because barristers cannot sue their post-cessation earnings should be tax-free, why should not all their earnings throughout their life be tax-free? Why should they not get the whole of their income tax-free, because they cannot sue? I cannot see why the principle should be applied after they retire and not during their active life.

Mr. Fletcher: I am grateful to my right hon. Friend for raising that question. The distinction is that in so far as they are recipients of income while they are working it is night that, although their fees are not contractually enforceable, they should be taxable. It would be quite unjust if barristers were exempted from Income Tax merely because the payment of their fees was not enforceable. Under the Income Tax code, income is income, whether or not fees can be recovered by process of law.

Mr. Mitchison: Perhaps my hon. Friend will accept what the Royal Commission said on this point, in paragraph 261, namely:
On this issue his post-cessation receipts seem to us to be indistinguishable from similar receipts of other professions and we think that they should be treated in the same way

Mr. Fletcher: That is paragraph 261, on which I have already commented.
I appreciated at the outset that, if I wanted to present this argument, I should have to deal with the recommendations of the Royal Commission. I put this forward merely because I think that it is a matter of general interest and not a matter of party political controversy.
The Royal Commission states that post-cessation receipts are indistinguishable from similar receipts of other professions. I think that the real distinction is this. Whereas, while they are pursuing a profession and deriving an income, and, therefore, it is perfectly proper that they should pay Income Tax and Surtax on everything that they


receive, whether it was contractually enforceable or not, as a result of the profession which they follow, if they cease to practise and are no longer members of the Bar, subsequent sums paid to them are, as a matter of law, paid gratuitously.
Artists and similar people can sue for money due to them, but if a member of the Bar ceases to practise he not only has no legal right to enforce any claim but he has no longer any moral claim for it, because although the argument is that while he is continuing his practice, although he has no legal right, he can enforce a moral right against solicitors—because otherwise they could be condemned for being somewhat unethical—that argument no longer applies in the case of a barrister who has retired and who has ceased to practise.
It seems to me, in my humble and limited scope, that there is a distinction here, and that there are considerations of justice, considerations of constitutional practice and theory, considerations of maintaining the independence of the Bar from which the judiciary is selected, quite apart from those put forward by my hon. and learned Friend. I hope that the Chancellor will bear all these things in mind in any decision that he reaches on this matter.

The Financial Secretary to the Treasury (Sir Edward Boyle): We have listened to a most interesting and very brave speech from the hon. Member for Islington, East (Mr. Fletcher) and I think that as a result of his remarks I can address the Committee at rather shorter length than might otherwise have been the case.
The effect of the Amendment of the hon. and learned Member for Kettering (Mr. Mitchison) would be to extend this Clause so as to charge all post-cessation receipts on businesses or professions the profits of which had been computed on the cash basis or, if we prefer to use the hon. and learned Gentleman's phrase, on the basis of assessment by payments.
I would remind the Committee what this Clause is seeking to do. This is one of several anti-tax avoidance Clauses. The earnings basis is recognised as normally the best method of computing the profits of a trade or profession; on the earnings basis, the amounts are credited in the account for the year in which they

are earned. Where this basis has been adopted, receipts may sometimes come in—the Committee has heard of the Leslie Howard and Peter Cheyney cases —after the trade or profession ceases to be carried on, which, because of their uncertain nature, cannot be included in profits until they take shape as payments, and cannot be assessed after the business has ceased because the trade or profession no longer exists. It is receipts of that kind which will be taxed under the Clause.
What the Clause does not seek to do is to tax post-cessation receipts which arise merely because the cash basis is adopted. I will try to make the point even clearer. The Clause imposes a charge only on two types of case. The first is the Peter Cheyney type of receipt, that is to say, on commission not becoming due until the business in which it was earned had ceased to be carried on. Secondly, there are receipts—such as the recovery of debt wholly or partly written off as paid during the life of the business.
I should like to say a word about the cash basis of assessment, or assessment by payments, to which the hon. and learned Gentleman referred. I think that it is generally recognised today that although it is not so satisfactory as the earnings basis, the cash basis is used fairly widely in the professions. Although I am not a lawyer myself I think that I am right in saying that this at one time or another has been blessed and recognised by the courts.
As the hon. Gentleman the Member for Islington, East said, barristers cannot sue for their fees and, therefore, they can only be assessed on the basis of their receipts; and the cash basis is then the only legal method of computing profits. [An HON. MEMBER: "Why?"] Because they cannot sue for their fees. They can only be assessed on the basis of their receipts, and, therefore, the only legal method, in view of the position of the Bar, is on the basis of assessment by payment.

Mr. Mitchison: I hope that the Financial Secretary will be a little clearer on that. The Royal Commission considered this point. It did not think much of it and came to the conclusion which I have just mentioned. I do not think much of it, either. I hope that the Financial Secretary will explain why


members of professions including the Bar cannot be assessed on an earnings basis.

Sir E. Boyle: I was coming to the question of the Royal Commission, which the hon. and learned Gentleman and the hon. Member for Islington, East also raised. It is perfectly true that it is inherent in the system of assessment on the cash basis that some receipts escape tax on the cessation of the profession. On the other hand, the freedom from tax of the post-cessation receipts is balanced by a double charge if the cash basis is first adopted; the Revenue always insists on the earnings basis in the opening years of any profession, except in the case of barristers, with the result that, whenever a taxpayer changes over to the cash basis, earnings which are unpaid at the change-over are, in effect, taxed twice.
In its final Report the Royal Commission recommended that all post-cessation receipts should be taxed on receipt. There are serious difficulties about this suggestion in relation to a receipt arising merely because the tax basis was adopted. I think it fair to say that the Royal Commission took no account of the duplicated charge in the opening years of the profession, to which I have just referred. We have to remember—and I think that the hon. Gentleman the Member for Islington. East alluded to it—that professional men on a cash basis look forward to their post-cessation receipts as a perfectly legal tax-free nest egg for their retirement, and to make this change here and now would, as, I think, the Royal Commission recognised, defeat their expectations in a very sharp way.

4.30 p.m.

Mr. Douglas Jay: Will the Financial Secretary recall that what the Royal Commission said was that two things should be done simultaneously: first, that the post-cessation receipts of 'barristers should be taxed; and, secondly, that assessments should be made of the superannuation payments? One was done in the 1956 Act. That strengthens the argument for what we are asking, that we should now carry out the other proposal.

Sir E. Boyle: I will come to this question about barristers, because I am fully aware that the fact that barristers are

excluded from the ambit of this Clause has attracted a good deal of comment outside.
I would say two things about barristers. The first is that since barristers are assessed on a cash basis, surely it is reasonable that they should receive no worse treatment than professional men generally who are also assessed on the cash basis. I do not see how we can make an exception of barristers.
The second point is this—and this is the more important—that we are, after all, here dealing with one important Clause which deals with the problem of tax avoidance, and there cannot be any question of barristers practising the tax avoidance devices which have made it necessary to bring in this Clause.
I would just remind the Committee of what my right hon. and learned Friend the Attorney-General said on Second Reading of the Bill:
The Government have been asked why Clause 30 does not apply to lawyers. The Leslie Howard and Peter Cheney cases established that book royalties paid after the death of authors were not subject to Income Tax. Following upon those cases, some authors have found it wise to discontinue their profession as authors and to become the employees of companies which they form and to write for the companies. …The barrister is not in a like position, The barrister who has built up a practice cannot cease his profession and then do the work of a barrister as an employee or partner. In fact, practising barristers do not cease to practise just for tax avoidance reasons"—[OFFICIAL REPORT, 3rd May, 1960; Vol. 622, c. 1039.]
That is the nub of the matter, and the object with which this Clause has been brought in, to combat tax avoidance, cannot apply to barristers. Therefore I do not believe that there is any reason at all why we should single out barristers for especially unfavourable treatment with regard to the cash basis.

Mr. Jay: Even though barristers may not cease practising for tax avoidance reasons, surely that is no reason why if, in fact, they cease practising in order to do something else, such as going into Government service, they should have the unique privilege of not being taxed.

Sir E. Boyle: It is not unique at all.
As I explained in the earlier part of my speech, the effect of the Amendment would be to charge the post-cessation receipts on businesses or professions the


profits of which had been computed on the cash basis. The Clause does not seek to tax post-cessation receipts which arise merely because the cash basis was adopted.
We believe that the Clause would be-perfectly satisfactory to deal with the problem of tax avoidance as it stands. We therefore do not think that there is any need in any way to discriminate against barristers. We think that it would be quite possible to achieve the objects of the Clause without extending its ambit by this method in the Amendment, which I ask the Committee to reject.

Mr. Diamond: I must say that I hope that the Financial Secretary understands the distinction that he is trying to make, because I fail to do so. I fail to understand how he can allege that we are singling out barristers for especially unfavourable treatment. What is happening is that the Government themselves are singling out barristers for specially fair treatment. I think that there needs to be a good deal more explanation.
The Amendment, as we all know, relates mainly to barristers who, we have heard, have a specially privileged position because they cannot sue for their fees. The first answer to that is that, of course, nobody is made to pay tax on any fees he does not get whether he sues for them or not. He is asked to pay tax only like any other taxpayer on income which comes into his hands at the time he has to pay it. Many taxpayers have to pay tax on income long before the money comes into their hands, in many cases. The barrister under this Amendment is only required to pay tax like any other citizen when the cash comes into his hands and is available for spending.
The difficulty here is a difficulty of measurement, but a difficulty of measurement only. It is certainly a little difficult, at a particular accounting date, to measure with precision what the income of a particular year is. This is a problem with which every accountant and every inspector of taxes is faced with regard to almost every business every day, the problem of measurement. One has to do the best one can.
But, for the Bar, they have continued this special privilege of being allowed to be taxed on a cash basis, knowing full well that the result will be at the end of the period that post-cessation
receipts will be tax-free. Surely, as we are dealing with a Bill which is intending to stop tax avoidance, it is unfair to the profession of the Bar, the senior legal profession, to let it be widely known that they alone are singled out for this preferential treatment. Far from what my hon. Friend the Member for Islington, East (Mr. Fletcher) said about this Amendment being against the interests of the Bar, I would say that it is in their own interests that the Bar, which exists to help achieve justice in this country, should not be the one profession singled out to be above the law. I should think that in their interests it should be clearly known and in everybody's knowledge that they are covered by the same legal requirements of every subject.
There is a slight technical point which has been raised about double taxation in the opening years. With deference, I think that the Financial Secretary was wrong in two respects. He was wrong when he said that this was the only legal method. I doubt whether he could give us that Section of the Act which states that barristers must be assessed by this method. He was quite wrong in saying that this is the only legal method. There is nothing to stop barristers being assessed on the income basis if they want to. This is a convenient method, but it surely cannot be alleged to be the only legal method of assessing barristers.
The Financial Secretary was surely quite wrong in saying that barristers, or professions other than the Bar, who wish to be assessed on a cash basis, had been assessed on the income basis in the opening years. This has applied only as a matter of practice in fairly recent times. There must be many who are assessed on the cash basis who were always assessed on the cash basis, including the years in which they started to practise.
This question of double taxation is a tiny and almost irrelevant point which, it is admitted on both sides, does not apply to the Bar. The Bar has always been assessed on the cash basis, and at the end of the period they are still left with a good deal of indebtedness in what has not been received and has not been subject to tax. I am surprised at my hon. Friend the Member for Islington, East attempting to distinguish with such precision between indebtedness and what


might be sued for. Of course, a barrister cannot sue for his fees, but surely we are not going to say that every solicitor responsible for the payment of fees is not going to pay an honest debt, a debt which is due, merely because he knows the barrister cannot sue? What extraordinary relationships exist between the two wings of the legal profession.

Mr. Mitchison: There is the distinction between before retirement and after.

Mr. Diamond: Everybody knows that this is a debt which is due. The fact that a man cannot sue for it merely puts it in the same category of debts of masses of businesses which find that for purely practical reasons they cannot sue, otherwise they will not get any more business. Any number of professional people know that if they sue a client, that will be the last time they will see that client. This is only for a purely practical purpose and it is not peculiar to barristers.
As for the allegation that barristers who want to be singled out for this special treatment and to be regarded as above the law because they are incapable of tax avoidance, I should think that those who say it require a good deal more evidence about human beings. Let us take the simple case of an extremely busy silk who is coming towards the end of his practice and earning £20,000 a year gross. He has about two years' fees owing of £40,000, and he has a clerk who, like his boss, is very busy. Who will blame this busy silk if he omits to tell his clerk in the closing period of his practice to send out bills to solicitors all the way round and encourage them by all means to pay the fees?
Who is to blame him if he omits to do that and allows the fees to accumulate a little, in the knowledge that if they are paid on the day that he ceases practice, they are subject to tax and possibly Surtax, but if they are paid in a following period they will cease to attract tax altogether? Who would say that the barrister, especially if he is practising in the tax Bar and knows about all these things, would never consider his own advantage in that way? It is due to the Bar to make it clear that neither it nor Parliament wants it to be singled out for special treatment under the law.

The Attorney-General (Sir Reginald Manningham-Buller): I listened to the hon. Member for Gloucester (Mr. Diamond) making his ninth speech on the same subject last night. I cannot say that I congratulate him on making his tenth speech. [An HON. MEMBER: "On a different subject"] It is on an entirely different subject, but on this subject I can find little substance in what he says. He is wholly wrong. He makes out that the barrister is in a special position in the matter of tax law, and he used the phrase that this was the one profession to be singled out to be beyond the law. That is not the case at all.
Many professions and people are taxed on a cash basis instead of on an earnings basis, and barristers are one section of the community who are taxed on a cash basis. Ever since the Income Tax law first started people have not been required to pay Income Tax except on income, and the receipts which have come in after the profession or the occupation has been discontinued are not, in the absence of special provisions, subject to tax, because they are no longer income receipts.
It has always been the fact that barristers cannot sue for fees and we are not now discussing whether that is a good or bad thing. My hon. Friend the Financial Secretary said quite correctly that one consequence of that is that one can really assess barristers only on a cash basis. But it is a great mistake to think that they are the only persons who are assessed on a cash basis. I did not intend to speak in this discussion, but in view of the observations which the hon. Member for Gloucester thought fit to make about the Bar I thought that I should do so to correct a wrong impression from which he was suffering.
The question raised by the Clause is not whether receipts after the termination of professions and occupations assessed on a cash basis should now be made liable to Income Tax where they never have been. The question here is something quite different—the avoidance operations which can be deliberately entered into and are quite distinct from true post-cessation receipts as a result of the two test cases in the House of Lords to which the hon. Member referred.
This is the whole object of the Clause. It is to tax that kind of what I might


call deliberate tax avoidance. The hon. Member for Gloucester thought fit to give an example of the sums which he thought might be involved when a barrister ceased to practise. The sort of estimates that are made of the sums not taxed as post-cessation receipts in my profession are very much exaggerated. The right hon. Member for Smethwick (Mr. Gordon Walker) appears to want to say something. If she wishes to interrupt I will give way.

Mr. Gordon Walker: If the right hon. and learned Gentleman wants me to interrupt. I will. It makes no difference at all to the principle if every case is as large as my hon. Friend the Member for Gloucester (Mr. Diamond) said, or only some cases are as large.

4.45 p.m.

The Attorney-General: I was not suggesting that it made any difference to the principle. I was making that observation and I was entitled to make it. This is a relevant circumstance and at would be wrong if it were thought that large sums of money are involved in that kind of post-cessation receipts. I should not like it to go out from the Committee that the barrister is being singled out for special treatment. His treatment is exactly the same as that of any other professional man who is assessed on a cash basis. There may be a question whether one should alter the system of tax legislation generally.

Mr. Roy Jenkins: Mr. Roy Jenkins (Birmingham, Stechford) rose—

The Attorney-General: I should like to finish a sentence before I give way.
One could make an alteration generally and, if one liked, tax as income something never regarded as income since Income Tax started, but that would be for general application. There is no ground for singling out the barrister
in this respect. [An HON. MEMBER: "Deal with the Amendment"] I am not now dealing with the Amendment. I am replying to the speech of the hon. Member for Gloucester.

Mr. Roy Jenkins: Has the right hon, and learned Gentleman finished a sentence?

The Attorney-General: Yes, I have.

Mr. Jenkins: Then will the right hon. and learned Gentleman give examples of other categories of people who, like barristers, are taxed on a cash basis on cessation?

The Attorney-General: There are many other professions. Many architects, for instance, are taxed on a cash basis. There are also engineers. The hon. Member can find that out. I am quite sure that that is so, and the effect, of course, is exactly the same.

Mr. Diamond: Will the right hon. and learned Gentleman answer two questions about fact, in case I was wrong in what I said about Inland Revenue practice? I am asking this as one speaking to the Amendment and, therefore, I am asking for information which can be obtained from the official advisers. Am I wrong in thinking that the Bar is the only profession in which every member is assessed on a cash basis? Am I wrong in thinking that the Bar alone has the advantage that every new practitioner is allowed to be assessed on a cash basis without being assessed on an income basis in his opening years? Will the Attorney-General answer those two specific questions?

The Attorney-General: Both specific questions are already covered by what I said. The right hon. Gentleman the Member for Smethwick is muttering, if he wishes to interrupt, perhaps he will rise. He keeps on muttering when I am endeavouring to answer questions. I wish that he would stop it. It is a regular habit of his and a bad one.
I covered the points which the hon. Member for Gloucester has just put to me. I pointed out that as a barrister cannot sue for his fees—and this goes to the root of it—he has no earnings in that category which can be assessed as earnings. Nothing comes in which can be treated as earnings. It is the case —and I do not personally see how it adversely affects the position one way or another—that the barrister can be assessed legally only on a cash basis.

Mr. Diamond: The right hon. and learned Gentleman has not answered my question. The Financial Secretary to the Treasury knows that he has his Parliamentary Private Secretary sitting behind him. The information should be placed before us when Parliament is being asked


to pass legislation which affects particularly a special profession. Is it or is it not the case that the Bar is the only profession every single member of which is assessed on a cash basis?
Is it, or is it not, the case that it is only the Bar of whom every single member is assessed on a cash basis? I know that there are practitioners in other professions who are assessed on a cash basis, but my information is that it is only the Bar of which every member is assessed on a cash basis. Most important of all, is it not the case that it is only the commencing barrister who under the new practice of the Revenue is not required to deal with his earnings on an income basis?

The Attorney-General: I thought that I had specifically answered the hon. Gentleman's questions. I am sorry if I did not make myself clear. It follows from what I said that the barrister, as he can only be assessed on a cash basis, is always assessed on a cash basis. Every barrister is, from the beginning to the end of his career. That answers that question, and I have answered it before.
The second question is whether there are any other professions where all the members can be taxed only on a cash basis. The answer is that there are no other professions of which I am aware whose members are not able to sue for their fees.

Mr. Mitchison: The bookmaker.

The Attorney-General: The bookmaker may be one example. The hon. Gentleman asked whether there was any other profession where all the members were assessed on a cash basis. Where a profession can sue for its fees, then I apprehend that some of them may be on the earnings basis.

Mr. Jay: I cannot congratulate the Attorney-General, either on his speech or on his answers. What he has done is to give the technical reasons why barristers' post-cessation receipts are not at present subject to tax, but that is what the Royal Commission did. Having done that—and this is Lord Radcliffe, when all is said and done—it said:
We appreciate that the peculiarity of his position means that he could not be required to compute his profits on an earnings basis, even if the Revenue desired to challenge the

present practice. But it does not seem to us that that has any real bearing upon the question whether, when his fees do come in, they should escape taxation as income because he is no longer in practice
It went on to propose that those fees when they came in should be subject to tax.
Secondly, the Royal Commission then said, as the only qualification of that, that something should be done by way of superannuation concessions to help the barristers and other self-employed persons of the same kind to meet the need for income after retirement. The Royal Commission said that those two things should be done complementary to one another. As we know, in the 1956 Act the Government accepted the second proposal but we still have not had the first proposal made by the Royal Commission accepted. That strengthens the case further.
Thirdly, we now have a situation in which the Government have come along and propose to remove this anomaly, this specially privileged position, from all other professions, but they are in practice singling out—whatever be the precise legal position—the barristers and possibly —this is the effect of the Clause—a few other fringe professions, and a small minority of persons.
If this goes through in this form this will become a major scandal in our tax system. When one hears it seriously argued, as I have, that we cannot get men to accept appointments as judges, or that we will not be able to get them unless they know that this special concession relates to barristers only, and when one hears it said that the Government have to keep this special discrimination in favour of this one profession or else they will not be able to recruit people into the Bar, it seems that we have reached a point which is exceedingly shocking to everybody in this Committee who is not a lawyer. I hope, therefore, that we shall contemptuously reject the Attorney-General's argument and carry the Amendment to a Division.

Mr. Gerald Nabarro: I intervene because I received a letter from my right hon. and learned Friend on this very point. I warned him in my original letter to him on behalf of solicitors that in connection with this Clause and this Amendment I would put one


or two questions to him. My right hon. and learned Friend said that he did not apprehend that there would be much difficulty in answering my questions.
Of course there is not. There is a technical and historical reason for barristers being placed in this unique position, but I ask my right hon. and learned Friend whether it is strictly true, in this year of grace, to say that a barrister, because he cannot sue for his fees, is in this special position? In the overwhelming majority of cases, when the brief is taken the barrister's fees are guaranteed by the solicitor briefing him.

Mr. Charles Doughty: No.

Mr. Nabarro: My hon. and learned Friend says that is wrong, but that is my information. As a layman I ask my right hon. and learned Friend a reasonable and genuine question about this. There is evidently one fiscal law for barristers and another fiscal law for solicitors. I was informed only this morning that the Law Society has made powerful representations to my right hon. and learned Friend on this point, so I am not expressing a view only as a layman.
I repeat that it is not possible for me as a layman, either in a personal capacity, or in a business capacity on behalf of a company, to employ the services of a barrister without going first to a firm of solicitors.

Mr. Doughty: So far so good. That is correct.

Mr. Nabarro: I am sure I am correct. So far so good.

Mr. Doughty: That is the truest thing my hon. Friend has said so far.

Mr. Nabarro: I may be inaccurate in what I am saying. I do not know. I am a layman, and I am not being mendacious. My hon. and learned Friend said I was wrong, but in my experience with lawyers I have never been able to go direct to a barrister. I have had to go to a solicitor first to employ a barrister for me, and in effect the solicitor guarantees the barrister's fees and he pays them out of his moneys and then submits his account to the client.
In such circumstances, and having regard to what the Royal Commission said, I do not think that it is good enough to go on relying on the technical reason which has been advanced for the last twenty to thirty years that, because of an historical accident—and that is all it is—the barrister should be placed in this unique position.
We all know that in the Committee today, and in the House of Commons, the overwhelming majority of members fall into one of two categories. They are either members of trades unions, or trade union officials, on the one hand, or they are lawyers on the other hand. Lawyers are the most powerful vested interest in the House and in this Committee. There is no doubt about that, and my right hon. and learned Friend, as the Attorney-General, is regarded as the senior legal luminary. I am already collecting black looks from my hon. Friend the Member for Darwen (Mr. Fletcher-Cooke). He is another section of the vested interest.
I have no objection to this practice being continued if there are valid and practical reasons for doing so, but I do not like it going on year after year because of what is nothing better than an historical accident—that is all. For the reasons adduced by the right hon. Member for Battersea, North (Mr. Jay), and because of the recommendation of the Royal Commission, I should like my right hon. and learned Friend to answer this question. As a layman I believe that the overwhelming majority of cases produce a situation whereby the barrister's fees are guaranteed by the solicitor. In those circumstances it is not good enough to say that a barrister should have these post-cessation earnings tax free as a unique case simply on the ground that he cannot sue for his fees.

5.0 p.m.

Mr. Enoch Powell: Before my right hon. and learned Friend the Attorney-General replies to my hon. Friend the Member for Kidderminster (Mr. Nabarro), will he clear up something which was not made clear in the course of his speech? He referred to members of a number of professions who, like barristers, are assessed on a cash basis. He referred to certain architects, engineers and others,


who are in the same position as barristers in that they are assessed on a cash basis. What I want to be clear about is whether in its present form the Clause will allow their post-cessation receipts to continue not to be taxed.

The Attorney-General: The answer to the question of my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) is that the effect of the Clause is such that their position will remain unchanged and they will not be taxed. The answer to my hon. Friend the Member for Kidderminster (Mr. Nabarro), who wants elucidation of the position of the Bar and its relationship with solicitors, is that there is nothing in the shape of a guarantee. I am sure that, with his business capacity, even if my hon. Friend got a guarantee he would not feel very happy, unless he could also sue if the guarantee was not kept.

Mr. Mitchison: I moved the Amendment in as quiet and unprovocative a manner as I possibly could. I did so deliberately, because this kind of thing arouses a lot of heat among members of the Bar and I thought that there was some heat, very naturally, in the reply of the right hon. and learned Gentleman the Attorney-General. I expected it and I think none the worse of him for it.
We are talking about income and we have been told that post-cessation receipts are not income. They do not attract Income Tax, but that does not mean that they are not income, for the things which attract Income Tax are very odd, indeed. It is extraordinary that anybody should suggest that barristers are the only people who cannot recover their earnings.
There was once a man called Smith who carried on a boot-legging trade in Canada. When the authorities tried to collect Income Tax from him, he said, "You cannot do that because you will be partners in my crime "The revenue authorities in Canada said, "We do not mind about that; it is income and we want the tax on it" They took him to the Privy Council and got their tax. I imagine that if Mr. Smith had tried to recover his earnings as a bootlegger, he would have found it difficult in Canadian courts. Moreover, I fail to see how Mr. Smith could have been assessed on an

earnings basis. I should have thought that bootleggers were almost inevitably assessed on a cash basis. To proceed up the scale a little, what about "bookies"? I do not know what a bookie's earnings are, but I know that bookies cannot recover debts in a court of law. Yet it is income and assessed as income in the tax he has to pay on his earnings as a bookie.

The Attorney-General: Those are receipts.

Mr. Mitchison: I agree. The Attorney-General is perfectly right, he could not be assessed on his earnings.
The position, therefore, is not that barristers are the only people concerned. The position was quite correctly stated by the Royal Commission. The only profession which has always computed its profits for taxation on a cash basis is that of barristers. It might be said that boot-legging, or even bookmaking, was not a profession.
However, we are dealing not only with the Bar, but with some cases in other professions, architects being an obvious instance. I should have thought it possible—I say no more—that there might be the same position among doctors, but barristers are the only profession which has always done it. The public, which in some ways is a trifle allergic to lawyers, does not like to feel that lawyers are getting special treatment and particularly does not like to feel that when lawyers are fully represented in the House of Commons.
I am not for a moment saying that members of the Bar in the House of Commons do not put their duties as Members of Parliament first. I think that they all do, but all of them, including the Attorney-General, should consider whether it is in the best interests of the Bar in the long run that the Bar should have a privileged position, as it has to some extent.
I have been looking at the membership of the Royal Commission. Its members were not ignorant of the law or of taxation practice. Indeed, it would have been rather odd, considering the purposes for which they were appointed, if they had been. The first chairman was Lord Cohen and the second was Lord Radcliffe, and Mr. James Millard


Tucker was a member of the Commission all through. Those people are not expected to be ignorant of what goes on at the Bar. After all, they have spent their lives at the Bar. They said:
We appreciate that the peculiarity of his position—
that is, the barrister's position—
means that he could not be required to compute his profits on an earnings basis, even if the Revenue desired to challenge the present practice".
That may well be so. When I was moving the Amendment, I said that I appreciated that there might be some administrative difficulties and considerable administrative changes. However, the Commission went on:
But it does not seem to us that that has any real bearing upon the question whether, when his fees do come in, they should escape taxation as income because he is no longer in practice
That is the short and simple point which we are considering not only in relation to the Bar but in relation to other people who may be similarly affected. The Commission's conclusion was:
On this issue his post-cessation receipts seem to us to be indistinguishable from similar receipts of other professions and we think that they should be treated in the same way".
There comes a time when people who are learned in these things, or have great technical or administrative experience, raise all sorts of complicated issues and difficulties and when the people who know most about it and the ordinary man in the street often agree over the heads of the other people.
This is a simple matter and the issue is simply whether the receipts of people who are at present assessed on a payment basis, including the one profession which has always been assessed in that way, but including others, should be distinguished from other professions in the matter of these receipts. That is the point and there is a very clear answer to it, the answer given by the Royal Commission which included a very high judicial authority as its chairman and one learned member of the Bar who knew, if not more, then certainly as much as anyone else at the Bar about Income Tax. It is nonsense to say that we can continue the distinction on the highly technical and rather archaic point that barristers cannot sue for fees—nor can a bookie.
I ask the Committee in this matter to take a rather broader view than same hon. Members, including my hon. Friend the Member for Islington, East (Mr. Fletcher) have taken so far. There is a very simple point here and as a House of Commons we ought to take it. We have had rather unconvincing speeches from members of the Government. I have the feeling that they did not really believe in their briefs. I am not suggesting that they were insincere or anything of that sort, but they carried no conviction with me.
The simple point is whether people who get an income in the ordinary sense of the word, through fees received for their professional activities after having ceased to exercise those activities, should be taxed on those receipts. Surely it is the worst possible answer to say "Yes", if they are assessed on an earnings basis, and "No", if they are assessed on a payments basis.
Who cares, on a question of morals, whether it is earnings or payments? The real point is, ought we to accept one group of people who are only distinguishable on the technical ground or only distinguishable because they have succeeded so far in being distinguishable? It is in the worst interest of a noble profession—and I say that advisedly—that its members should rely on the sort of defence that the Government and some hon. Members opposite have put up on their behalf today.
I urge the Committee on a matter of this sort to take the law into its own hands and to say, "We think it right that these post-cessation receipts should be taxed in the same way for everybody," because, as the Royal Commission found, in plain English, they are indistinguishable whatever the form of assessment may be.
As to the other point, which has been answered by my hon. Friend, it is perfectly true that the Royal Commission made a reservation in connection with superannuation provisions, but the fact is that these superannuation provisions have since been met and it is only this ridiculous anomaly which persists and which would persist if the Clause went through unamended.
I ask the Committee to exercise a little more sense, if I may say so, on this matter and to do the right thing. It is perfectly obvious what that is.

Mr.Anthony Crosland: On a point of order. There are a large number of barristers on the benches opposite and I feel very disinclined to express my own view on this extremely difficult Amendment without knowing how barristers on the Government benches feel about it. We had the benefit of about eighteen hours—

The Temporary Chairman (Mr. John Arbuthnot): That is not a point of order.

Mr. Gordon Walker: Would it be the case that a bookmaker, who, I understand, cannot sue for collection of bets which form a large part of his income, would have his post-cessation receipts from betting tax-free? As far as I can see, bookmakers and barristers seem in this respect to be on exactly the same footing in that they cannot sue, in the case of barristers for the whole income and in the case of bookmakers for a large part of it. Would a bookmaker also have his post-cessation debts tax-free?

The Attorney-General: Any person assessed on a cash basis, bookmakers and everyone else, will not have to pay tax on any receipts which come in after they cease to carry on their profession or occupation. That applies to bookmakers assessed on that basis and to anyone else.

Mr. Gordon Walker: That does not quite answer my question. Is it general that bookmakers are so assessed or do barristers have the double disability of not being able to sue and being taxed on a receipt basis? Are bookmakers normally taxed on receipts?

The Temporary Chairman: The Question—

Mr. Fletcher: Surely before the Committee comes to a decision on the Amendment we are entitled to have some clarification. It really is a very serious point which my right hon. Friend the Member for Smethwick (Mr. Gordon Walker) has just raised.

The Attorney-General: The Attorney-General rose—

Mr. Fletcher: Before the right hon. and learned Gentleman replies and in order that he may have time to collect his thoughts and give us a considered reply, may I remind him that a great

many of us have been spending a considerable time considering the Betting and Gaming Bill, as a result of which we shall shortly have an entirely different system in this country under which betting offices will be legalised and under which there will be a system of registration of bookmakers. Are the Government going to tell us that one result of the Betting and Gaming Bill is to be that bookmakers shall be registered and controlled and that their profits shall be known and that the public will have information about the profits of bookmakers in the future?

5.15 p.m.

The Temporary Chairman: I must ask the hon. Member to relate what he is saying to the Amendment under discussion. We are not discussing the Betting and Gaming Bill.

Mr. Fletcher: I am relating my argument to what I regard as the very pertinent question put to the Attorney-General by my right hon. Friend. My right hon. Friend inquired, and I would like to know for my own guidance, whether there is any distinction between the position of bookmakers and barristers. Hitherto this debate has been conducted on the basis that barristers are in some particular and privileged category.
My right hon. Friend asked what the position was in regard to bookmakers. Hitherto, as I understand it, they have been taxed on a cash basis. As a result of the Betting and Gaming Bill it looks to me as if, in future, they are likely to be taxed on an entirely different basis for the reason that, in future, they will be registered and obliged to render accounts and therefore may well be taxed on a different basis. That being so, in the case of bookmakers who have been taxed on one basis there will probably arise the question of cessation. May we know whether, if they claim a cessation because we are going to establish a different basis of taxation, they will have the same privileges as are indicated in the Bill with regard to barristers?

The Attorney-General: Perhaps I could answer this question in so far as it really relates to the debate and again repeat my answer to the right hon. Gentleman. Apparently, I have not made it clear to him. No doubt, that was my fault. I do not hope to satisfy the


right hon. Gentleman. That would be hoping for too much.
In answer to the hon. Gentleman and also to the right hon. Gentleman, the answer is that anyone who is assessed for tax on a cash basis will not be taxed on receipts which come in after cessation. That is absolutely clear. Whether or not they are assessed on a cash basis does not solely depend on whether they can sue for fees for work done. There are those who can sue when they are still assessed on a cash basis.
The answer about post-cessation receipts applies to all assessed on a cash basis. I really cannot make it clearer than that. If the question is asked whether bookmakers can sue in respect of bets and recover them, the answer is that they cannot because of the Gaming Act.

Mr. Frank Bowles: May I ask the right hon. and learned Gentleman another question? Can a person cease his profession more than once?

Mr. Jay: Yes.

Mr. Bowles: My right hon. Friend says "Yes". Therefore, a person could leave the Bar, become President of the Board of Trade and then, when he ceased being President of the Board of Trade, could go back to the Bar and then, again, become a director of Shell and get his lump sum free of tax over and over again. Can the right hon. and learned Gentleman clear up that point?

The Attorney-General: We are now descending into details of hypothetical cases. Yes, a person can cease to practise a profession more than once. That has been done; I can think of one or two such occasions when that has happened. But the point which my hon. Friend made on the Clause is—

Mr. Nabarro: Was that my speech?

The Attorney-General: No, oddly enough it was not.
The point which my hon. Friend made was that this Clause is directed to stop what is a new form of tax avoidance arising out of the decision in the Cheyney case, in particular, since when, particularly in the writing profession, the practice has developed of ceasing to carry on that profession and of forming a one-man company and becoming the em-

ployee of that company and writing for it. It is to try to stop that kind of deliberate avoidance, not the fortuitous circumstance of a barrister ceasing to practise and becoming the President of the Board of Trade but deliberate avoidance, that this Clause has been designed.

Mr. Roy Jenkins: It is clear that the Attorney-General is more closely informed about the affairs of barristers than about bookmakers or any other category. This is, perhaps, reasonable and not unnatural. The right hon. and learned Gentleman has not, however, applied himself to giving us a clear view of exactly how the cash rule applies and whether it is a reasonably equitable rule or simply a matter purely of accident which is extremely fortunate for one profession and, on the whole, unfortunate for everybody else in the same category.
For example, is it open to an individual whose earnings may be equally or more hazardous than those of a barrister to apply to exercise an option to be assessed on a cash basis rather than an earnings basis? There might well be people in this category. As the Attorney-General told us, the Clause was designed to stop a certain form of tax avoidance developed by some authors. Certainly, we are entirely in favour of stopping that. We are a good deal more enthusiastic about stopping tax avoidance of any sort than any hon. Members opposite, except the Government Front Bench, have shown themselves throughout these proceedings.
One can imagine the position of an author who certainly has no desire to indulge in particular manœuvres to obtain tax avoidance advantages but who, at the same time, may or may not have royalties from, say, the Soviet Union. If the royalties are not paid, he is not remotely in a position to sustain an effective action for legal recovery of those earnings. What happens if they happen to come in after he has ceased to practise as an author or even if he happens to have died? I should say that these clearly were far more hazardous earnings than the normal run of a barrister's fees.
If an author finds himself in that position, can he apply to be treated on a cash basis and, therefore, to have the


same advantages as apply to barristers? We ought to have information about this from the Attorney-General. He has not told us much about the detailed position of other professions or given any justification for the existence of the cash as opposed to the earnings rule, except simply to state that this is an immutable law and is something which we should accept.
On the earlier stages of the Amendment, the Attorney-General appeared to think that truculence was a substitute for reason. On the prod of mutterings, as the right hon. and learned Gentleman called it, of my right hon. Friend the Member for Smethwick (Mr. Gordon Walker), the Attorney-General gradually became more agreeable as the Clause went on. But he still has not given us much information about the position. A great number of hon. Members on this side, and, I would have thought, on the Government side, too, feel extraordinarily unhappy after hearing the arguments about the special favourable position in which barristers find themselves.
There are a great number of hon. and learned Gentlemen whom I see in varying positions on the benches opposite—

Mr. Nabarro: I am not learned.

Mr. Jenkins: I would not for one moment dream of suggesting that the hon. Member for Kidderminster (Mr. Nabarro) was in any way learned. Although he sometimes forgets it, the hon. Member is not the only Member in the House, nor even the only Member on the benches opposite. I see some around him who certainly are entitled to the designation of both hon. and learned.
There is the difficulty that if we have, perhaps, a thin Committee on this fine May afternoon, the Amendment may be resisted with the majority being largely made up of hon. and learned Members opposite. The rule is quite clear that hon. Members of the House who have an interest are not thereby prevented from voting, although in any local authority it would be regarded as most improper that this should be done. I ask hon. and learned Members opposite, bearing in mind particularly their judicial position, to consider whether, in

view of the strong feelings which have been expressed and the special pleas which have been put forward on their behalf by the Attorney-General—special but wholly unconvincing—it would not be more becoming for them to abstain from voting when the Division comes and to let the matter be decided by a vote of those Members of the House who, although honourable, are not learned.

Mr. William Clark: May I ask my right hon. and learned Friend a question? If a professional man apart from a barrister is at present on the cash basis as opposed to the earning basis, can the Inland Revenue at any time say to him, "You must change your basis from cash to earnings"?

The Temporary Chairman: The question is—

Hon. Members: Answer.

Mr. E. G. Willis: This is most unsatisfactory. I have listened to the debate and to the Government Front Bench spokesmen. As a layman, I have not heard any convincing argument on this matter. It is true that the Financial Secretary to the Treasury tried to produce arguments, which were promptly destroyed by his right hon. and learned Friend the Attorney-General, who knocked away the only argument about the double payment when the change was made. So that we have had two conflicting arguments put to the Committee from the Government Front Bench.
When, because of the lack of information and the lack of reasonable argument, hon. Members have tried to obtain information to enable them to make up their minds, the Government Front Bench refuse to give it to them. Are we supposed to vote on the basis of not being given the information for which we are asking? This is a most discourteous way to treat the Committee. When the hon. Member for Nottingham, South (Mr. W. Clark), on the Government side, asks from the back benches for information, the least the Government should do would be to give the information. A lot of conversation and muttering and running to the Box is going on, but the results of it all are not being made available to the Committee. We ought to be told something


more. If this is the best way the Government Front Bench can treat the Committee, it is up to the Committee to try to obtain what it wants.

Sir E. Boyle: I will try to be brief, informative and not at all truculent. There are certainly circumstances in which the Revenue will make a man go back from the cash basis to the earnings basis. The Revenue always tries, however—and I am sure that it speaks the truth about this—in assessing a man's earnings, to arrive at the conclusion which is the fairer basis of the two.
I reminded the Committee when I spoke about an hour ago on the Clause that in the opening years of a profession other than the profession of a barrister, the Revenue always insists upon the earnings basis. I also reminded the Committee that when a man goes from the earnings basis to the cash basis, that involves that earnings which are unpaid at the change-over are, in effect, taxed twice. That answers one of the points raised by the hon. Member for Gloucester (Mr. Diamond). I hope that with this explanation and answer to the points which have been raised, the Committee may now be ready to come to a decision on the Amendment.

Mr. Mitchison: We all noticed that the Financial Secretary pointed out that this rule did not apply to the Bar. He said, "professions other than the Bar".

It is fair to say, as did the Royal Commission, that the Bar, for good or for ill, has always been assessed on a payment basis and not on an earnings basis. I think I am right in saying that, with that exception, the earnings basis is the usual basis and that it rests with the inspector or the Revenue authorities whether a man should be allowed to be assessed on a cash basis. The Financial Secretary will correct me if I am wrong.

My second point is a quite small one. It has been said by several speakers from the Government Benches that the object of the Clause was to stop discreditable avoidance of tax. It is only fair to say, in connection with that, that in both the cases that went to the Lords there was no suggestion whatever of any avoidance or anything of the sort, and accordingly, if and in so far as this Clause brings into the Revenue net cases strictly comparable with those two, it will he dealing with thoroughly honest and not in any way dishonest people.

The Attorney-General: The Attorney-General indicated assent.

Mr. Mitchison: I am glad to have the right hon. and learned Gentleman's assent.

Question put, That the words proposed to be left out stand part of the Clause:—

The Committee divided: Ayes 198, Noes 126.

Division No. 95.]
AYES
[5.30 p.m.


Agnew, Sir Peter
Campbell, Gordon (Moray &amp; Nairn)
Farey-Jones, F. W.


Aitken, W. T.
Carr, Compton (Barons Court)
Fisher, Nigel


Allan, Robert (Paddington, S.)
Cary, Sir Robert
Fletcher-Cooke, Charles


Allason, James
Channon, H. P. G.
Fraser, Ian (Plymouth, Sutton)


Alport, C. J. M.
Chataway, Christopher
Freeth, Denzil


Amory, Rt. Hn. D. Heathcoat (Tiv'tn)
Chichester-Clark, R.
Gammans, Lady


Atkins, Humphrey
Clark, Henry (Antrim, N.)
Gardner, Edward


Balniel, Lord
Clark, William (Nottingham, S.)
Glover, Sir Douglas


Barber, Anthony
Cleaver, Leonard
Glyn, Sir Richard (Dorset, N.)


Barlow, Sir John
Collard, Richard
Goodhart, Philip


Barter, John
Cooper, A. E.
Grant, Rt. Hon. William (Woodside)


Batsford, Brian
Cooper-Key, Sir Neill
Grant-Ferris, Wg Cdr. R. (Nantwich)


Beamish, Col. Tufton
Cordeaux, Lt.-Col. J. K.
Green, Alan


Bell, Philip (Bolton, E.)
Corfield, F. V.
Gresham Cooke, R.


Bell, Ronald, (S. Bucks.)
Courtney, Cdr. Anthony
Grimston, Sir Robert


Bennett, F. M. (Torquay)
Craddock, Beresford (Spelthorne)
Grosvenor, Lt.-Col. R. G.


Biggs-Davison, John
Crosthwaite-Eyre, Col. O. E.
Hall, John (Wyoombe)


Bingham, R. M.
Cunningham, Knox
Hamilton, Michael (Wellingborough)


Birch, Rt. Hon. Nigel
Curran, Charles
Hare, Rt. Hon. John


Bishop, F. P.
Currie, G. B. H.
Harris, Frederic (Croydon, N. W.)


Black, Sir Cyril
Dalkeith, Earl of
Harris Reader (Heston)


Bossom, Clive
d'Avigdor-Goldsmid, Sir Henry
Harrison, Brian (Maldon)


Bourne-Arton, A.
de Ferranti, Basil
Harrison, Col. J. H. (Eye)


Box, Donald
Digby, Simon Wingfield
Harvie Anderson, Miss


Boyle, Sir Edward
Doughty, Charles
Head, Rt. Hon. Antony


Braine, Bernard
Drayson, G. B.
Hendry, Forbes


Bromley-Davenport, Lt.-Col. W. H.
du Cann, Edward
Hiley, Joseph


Brooman-White, R.
Duthie Sir William
Hill, J. E. B. (S. Norfolk)


Bullus, Wing Commander Eric
Errington, Sir Eric
Hinchingbrooke, Viscount


Burdon. F. A.
Erroll, F. J.
Hobson, John




Holland, Philip
Marlowe, Anthony
Smyth, Brig, Sir John (Norwood)


Hopkins, Alan
Marshall, Douglas
Spearman, Sir Alexander


Hornby, R. P.
Marten, Neil
Speir, Rupert


Howard, Gerald (Cambridgeshire)
Mathew, Robert (Honiton)
Studholme, Sir Henry


Howard, Hon. G. R. (St. Ives)
Matthews, Gordon (Meriden)
Summers, Sir Spencer (Aylesbury)


Howard, John (Southampton, Test)
Maydon, Lt.-Cmdr. S. L. C.
Sumner, Donald (Orpington)


Hughes-Young, Michael
Morrison, John
Tapsell, Peter


Hutchison, Michael Clark
Mott-Radclyffe, Sir Charles
Taylor, W. J. (Bradford, N.)


Iremonger, T. L.
Nabarro, Gerald
Temple, John M.


Irvine, Bryant Godman (Rye)
Noble, Michael
Thatcher, Mrs. Margaret


Jackson, John
Page, A. J. (Harrow, West)
Thomas, Peter (Conway)


James, David
Page, Graham
Thompson, Richard (Croydon, S.)


Jenkins, Robert (Dulwich)
Pannell, Norman (Kirkdale)
Thorneycroft, Rt. Hon. Peter


Johnson, Dr. Donald (Carlisie)
Pearson, Frank (Clitheroe)
Thornton-Kemsley, Sir Colin


Kerans, Cdr. J. S.
Peel, John
Tilney, John (Wavertree)


Kershaw, Anthony
Pickthorn, Sir Kenneth
Turner, Colin


Kimball, Marcus
Pilkington, Capt. Richard
Turton, Rt. Hon. R. H.


Kirk, Peter
Pitman, I. J.
van Straubenzee, W. R.


Kitson, Timothy
Pitt, Miss Edith
Vaughan-Morgan, Sir John


Lambton, Viscount
Powell, J. Enoch
Vickers, Miss Joan


Lancaster, Col. C. G.
Prior, J. M. L.
Wakefield, Edward (Derbyshire, W.)


Legge-Bourko, Maj. H.
Prior-Palmer, Brig. Sir Otho
Ward, Dame Irene (Tynemouth)


Legh, Hon. Peter (Petersfield)
Proudfoot, Wilfred
Watkinson, Rt. Hon. Harold


Lewis, Kenneth (Rutland)
Redmayne, Rt. Hon. Martin
Watts, James


Lilley, F. J. P.
Rees, Hugh
Webster, David


Linstead, Sir Hugh
Ridley, Hon. Nicholas
Wells, John (Madstone)


Litchfield, Capt. John
Ridsdale, Julian
Whitelaw, William


Loveys, Walter H.
Robinson, Sir Roland (Blackpool, S.)
Wilson, Geoffrey (Truro)


Lucas, Sir Jocelyn (Portsmouth, S.)
Roots, William
Wise, A. R.


Lucas- Tooth, Sir Hugh
Russell, Ronald
Wolrige-Gordon, Patrick


McAdden, Stephen
Scott-Hopkins, James
Woollam, John


MacArthur, Ian
Sharples, Richard
Worsley, Marcus


McLaren, Martin
Shaw, M.
Yates, William (The Wrekin)


Maclean, Sir Fitzroy (Bute &amp; N. Ayrs.)
Simon, Sir Jocelyn



Maddan, Martin
Skeet, T. H. H.
TELLERS FOR THE AYES:


Maginnis, John E.
Smith, Dudley (Br'ntf'd &amp; Chiswick)
Mr. Finlay and Mr. Gibson-Watt.


Manningham-Buller, Rt. Hn. Sir R.
Smithers, Peter



Markham, Major Sir Frank






NOES


Ainsley, William
Hamilton, William (West Fife)
Peart, Frederick


Albu, Austen
Hannan, William
Plummer, Sir Leslie


Allen, Scholefield (Crewe)
Hayman, F. H.
Probert, Arthur


Benn, Hn. A. Wedgwood (Brist'l S. E.)
Henderson, Rt. Hn. Arthur (Rwly Regis)
Proctor, W. T.


Benson, Sir George
Hill, J. (Midlothian)
Redhead, E. C.


Blackburn, F.
Holman, Percy
Reynolds, G. W.


Blyton, William
Houghton, Douglas
Robens, Rt. Hon. Alfred


Bowden, Herbert W. (Leics, S. W.)
Hughes, Emrys (S. Ayrshire)
Robinson, Kenneth (St. Pancras, N.)


Bowen, Roderic (Cardigan)
Hunter, A. E.
Rogers, G. H. R. (Kensington, N.)


Bowies, Frank
Hynd, H. (Accrington)
Ross, William


Brockway, A. Fenner
Hynd, John (Attercliffe)
Silverman, Julius (Aston)


Butler, Herbert (Hackney, C.)
Irving, Sydney (Dartford)
Silverman, Sydney (Nelson)


Butler Mrs. Joyce (Wood Green)
Janner, Barnett
Skeffington, Arthur


Callaghan James
Jay, Rt. Hon. Douglas
Snow, Julian


Castle, Mrs. Barbara
Jenkins, Roy (Stechford)
Sorensen, R. W.


Corbet, Mrs. Freda
Johnson, Carol (Lewisham, S.)
Steele, Thomas


Crosland, Anthony
Johnston, Douglas (Paisley)
Stewart, Michael (Fulham)


Grossman, R. H. S.
Jones, Rt. Hn. A. Creech (Wakefield)
Stones, William


Cullen, Mrs. Alice
Jones, Dan (Burnley)
Strauss, Rt. Hn. G. R. (Vauxhall)


Darling, George
Kenyon, Clifford
Strouss, Dr. Barnett (Stoke-on-Trent, C.)


Davies, Harold (Leek)
Key, Rt. Hon. C. W.
Summerskill, Dr. Rt. Hon. Edith


Deer, George
King, Dr. Horace
Swingler, Stephen


Delargy, Hugh
Lewis, Arthur (West Ham, N.)
Taylor, John (West Lothian)


Dempsey, James
Loughlin, Charles
Thompson, Dr. Alan (Dunfermline)


Diamond, John
Mabon, Dr. J. Dickson
Thomson, G. M. (Dundee, E.)


Dodds, Norman
MacColl, James
Thornton, Ernest


Driberg, Tom
McInnes, James
Wade, Donald


Ede, Rt. Hon. Chuter
McKay, John (Wallsend)
Warbey, William


Edwards, Walter (Stepney)
McLeavy, Frank
Weitzman, David


Evans, Albert
Mallalieu, E. L. (Brigg)
Wells, Percy (Faversham)


Fernyhough, E.
Marquand, Rt. Hon. H. A.
Wells, William (Walsall, N.)


Fitch, Alan
Mendelson, J. J.
Wheeldon, W. E.


Foot, Dingle
Millan, Bruce
White, Mrs. Elrene


Forman, J. C.
Mitchison, G. R.
Wigg, George


Fraser, Thomas (Hamilton)
Morris, John
Wilkins, W. A.


Gaitskeil, Rt. Hon. Hugh
Moyle, Arthur
Williams, W. R. (Openshaw)


Ginsburg, David
Oliver, G. H.
Willis, E. G. (Edinburgh, E.)


Gordon Walker, Rt. Hon. P. C.
Oram, A. E.
Wilson, Rt. Hon. Harold (Huyton)


Gourlay, Harry
Pannell, Charles (Leeds, W.)
Woof, Robert


Griffiths, Rt. Hon. James (Llanelly)
Pargiter, G. A.
Zilliacus, K.


Grimond, J.
Parkin, B. T, (Paddington, N.)



Hale, Leslie (Oldham, W.)
Paton, John
TELLERS FOR THE NOES:


Hall, Rt. Hon. Glenvil (Colne Valley)
Pavitt, Laurence
Mr. G. Lawson and Dr. Broughton.

Mr. Barker: I beg to move, in page 26, line 11, to leave out from "where" to the end of line 14, and to insert:
all credits and liabilities accruing during that period as a consequence of the carrying on of the trade, profession or vocation are brought into account in computing those profits or gains for tax purposes, and not otherwise".
This Amendment provides for the redefinition of the earnings basis. The reason is that the Clause as drafted defines the computation of profits on the earnings basis—I quote from subsection (5)—as a computation by reference
to the incomings, credits, outgoings and liabilities accruing
during the period for which the profits fell to be computed.
It has been pointed out that the words, "incomings and outgoings" may introduce some uncertainty. There is the possibility that the words
incomings, credits, outgoings and liabilities
may be treated as disjunctive, so it might be argued that a person not on the earnings basis was on the earnings basis because his profits were computed by reference to his incomings, that is, his cash receipts, and his outgoings, that is, his cash payments. In fact, it is not necessary to refer to the incomings and outgoings in defining the earnings basis because they are, in effect, included in credits and liabilities, so in any case the omission of the words improves the subsection and I commend the Amendment to the Committee.

Mr. Mitchison: I agree

Amendment agreed to.

Mr. Barber: I beg to move, in page 26, line 15, after "sum", to insert:
received in payment of a debt".
This small Amendment is designed to guard against any possibility that the existing words in the second half of subsection (5) shall be capable of any misconstruction. This part of the subsection is designed to ensure that all bad debt recovery will be treated as post-cessational receipts. Were it not for the insertion of the proposed words there is just a possibility that it might be argued that the effect of the wording restricts the operation of the Clause to bad debt recoveries only.

Mr. Mitchison: May I express the hope that, this being the Government's thinking period, they will start thinking earlier next time?

Amendment agreed to.

5. 45 p.m.

Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. Nabarro: I rise only to put the remainder of my questions to my right hon. and learned Friend the Attorney-General on the matter that was the subject of a particular controversy over an Amendment to this Clause moved by the Opposition. The Law Society, on behalf of an overwhelming majority of solicitors in this country, has made powerful representations to my right hon. and learned Friend—I am informed—on the question of the unique position of barristers as to post-cessation earnings and the fact that similar arrangements do not apply to solicitors when a partnership is ended and there are post-cessation receipts in those circumstances.
Would my right hon. and learned Friend be agreeable to placing in the Library of the House the representations made to him by the Law Society and the detailed answer he sends to them in order that every hon. Member may see for himself why there is a distinction between barristers and solicitors and members of other professions? I said earlier that I regarded this as an historical accident. I have just voted with the Government—

Sir Henry d'Avigdor-Goldsmid: Was that an historical accident?

Mr. Nabarro: No, it was not an historical accident on that occasion; it was quite premedidated, I can assure my hon. Friend.
The reason why I voted for the Government is very simple to explain. This information was sent to me only four or five days ago. There is a long history associated with the unique position—as I call it—of barristers in this context and I think that the Government ought to have more time than four or five days to consider it. I am particularly interested in whether my right hon. and learned Friend will give the assurance I seek that


he will place in the Library, in a convenient position for access by all hon. Members these representations of the Law Society on behalf of the solicitors and the detailed and considered reply he sends to them. We have not ended the matter here. The Government's defence of the position of barristers to which I have been listening in the last hour or so, to express it in the most charitable way, was a pretty feeble defence, and I think this position—

Mr. Mitchison: They are a feeble Government.

Mr. Nabarro: I think that the Government ought to be given time to consider it. This is the first time for years that this matter has been raised—

Mr. Mitchison: Oh.

Mr. Nabarro: It is the first time, if I may correct the hon. and learned Gentleman, that it has been raised for years in Committee on the Finance Bill. I cannot concern myself directly with the deliberations of the Royal Commission; I can only study its Report.
I do not think that the Government have heard the end of it. I think that we shall have this before us again next year, because of the reply which was given today which, to a large number of laymen, was not logical, satisfactory or conclusive. I do not want to express myself one way or the other but merely to quote the words of my right hon. and learned Friend from a letter delivered to me at the letter rack half an hour ago. My right hon. and learned Friend, writing in the first person, said:
I do not feel in the least alarmed at the possibility that to enlighten yourself"—
that is me—
as to the legal profession you may feel disposed to ask some questions! I do not apprehend that there will be much difficulty in answering them
My right hon. and learned Friend answered very shortly one question which I put to him, but writing nasty letters to his colleagues does not help to solve the problem and I want to see the—

Mr. James Griffiths: Another split.

Mr. Nabarro: No. I occasionally write nasty letters to my right hon. and learned Friend; it is quite mutual.
I wish to enlighten myself properly. I want to know what the Law Society did say on behalf of the solicitors, and particularly I want to know what my right hon. and learned Friend replied. Then I shall be able to judge whether the defence to the Amendment put by the Opposition was entirely satisfactory.

Mr. Stevens: I wish to raise a very different point. Subsection (4, b) provides that any capital allowance under Part X or Part XI of the Act of 1952 which has not been set off against previous profits at the date of discontinuance may be carried forward and the earnings or receipts after discontinuance may be reduced by the unexpended balance of these capital allowances. I am not clear that the balance of ordinary losses unused at the date of discontinuance can similarly be carried forward.
I have read subsection (4, a) with care, and at first sight it seems to be the answer to my point, but I am fairly sure in my own mind now that that is not so. Subsection (4, a) provides that
 any loss, expense or debit…incurred by him which would have been deducted in computing for tax purposes
may be changed. I am not sure that an assessable loss for tax purposes can be "incurred for tax purposes". I do not quite know the object of subsection (4, a). It does not seem to cover the point I have in mind. I hope that the Attorney-General will assure me and make sure that an unused balance of loss can be carried forward and set off against earnings or receipts subsequently coming in.

Mr. Powell: Before we part with this Clause I wish to refer to subsection (6), which has aroused considerable anxiety. Subsection (6) specifies the material date which determines whether sums are to be taxable as a result of this Clause or not and the material date is the date of the receipt of the sums. It would appear to be more logical and equitable that the material date should not be that of the receipt of the sums, which is something over which the taxpayer has no direct or necessary control, but the date of the discontinuance, which is the decision which he takes that has these consequences.
Where the discontinuance took place before Budget day, it took place as


a result of a decision taken by the taxpayer in the light of the law as it then stood. The Resolution which this Committee passed on Budget day, and this Clause in fulfilment of it, alters that law and may thereby in many cases have substantially altered the considerations which led a taxpayer to discontinue, or to discontinue on a particular day. I apprehend that this may apply in many cases—determination, for example, of partnerships where a consideration passed in view of the determination and where the discontinuance was decided upon at a particular moment of time, quite properly, in regard to the tax consequences as then known.
What I wish to put to my right hon. and learned Friend the Attorney-General, or to my right hon. Friend the Chancellor, is that the material date ought equitably in this context to be the date of the decision, whether it is the decision to discontinue or, perhaps, the undertaking of an obligation to discontinue. At any rate, it should be the point of time at which the taxpayer last has the matter within his own control.

Sir H. d'Avigdor-Goldsmid: I wish to support my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) because I have heard of two important cases in which very considerable injustice is being done by the particular point to which he referred.
The first case is that of a partner in a firm of solicitors, who died in 1955. In preparing the Estate Duty affidavit, account was taken of outstanding debts and work in progress which would be realised subsequent to the date of death on the basis that such debts and work in progress would not be subject to Income Tax and Surtax. Estate Duty was paid on that basis. That seems a clear case on the present wording of the Clause. Having paid Estate Duty, the subsequent payments would be liable to Surtax.
The second case is not quite so glaring, but it goes back even further. It refers to an accountancy partnership which was the subject of a cessation so far as one of the partners was concerned in 1951, but it continues to realise sums related to work in progress outstanding at the date of cessation.
I mention those two points—although, frankly, the second one can only be a small one—because I have personal

knowledge of both these cases. They are true cases and I feel that there may be many such cases which will be still adversely and unfairly affected by insisting on the date as it stands.

The Attorney-General: I am sure that my hon. Friends realise that there is no intention here to do anything which is in any sense unfair, but, in answer to the points raised by my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) and my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), I should point out that there is a real difficulty here.
Take, for instance, the discontinuance by death, which gave rise to the Leslie Howard case and the Cheyney case. If we take that date of discontinuance we may have all one needs for receipts coming in, and they may be very substantial, for the next thirty or forty years. It would seem right in theory that those receipts should be subject to tax. Take the case of a voluntary discontinuance which has operated before 6th April, 1960, There, again, we may have receipts of what is really an income character coming in over a long period of years. So I do not think it would be right to take the date of discontinuance as the material date for the purpose of subsection (6). My hon. Friend the Member for Walsall, South drew attention to two cases which I should like to look at to see in what respect they could be met and to consider them. I do not expect for a moment that he expects me to give a detailed reply to those detailed cases to which he drew attention.
In reply to the point raised by my hon. Friend the Member for Portsmouth. Langstone (Mr. Stevens), the words in subsection (4, a) were meant to cover losses and to enable losses to be carried forward if they could have been deducted from the assessable profits of the continuing business if the business had continued to be carried on. If there is any doubt about it we shall certainly look at the terms to make sure that that happens.
My hon. Friend the Member for Kidderminster (Mr. Nabarro) is not here —[Interruption.] Oh, he is here. I am sorry that he did not read the letter to which my letter was a reply. His letter had a very ominous threat in the last


paragraph. Nor did he refer to the fact that my answer was somewhat facetious, as I think he would see from the apostrophes I put at the end of the phrase when I said that I was not frightened of his questions. I assure him that the fact is the Law Society has not written to me, so I cannot publish in the Library any letter it has written to me. All I have seen is the letter that the Society sent to my right hon. Friend the Chancellor, and in that letter the Society does not refer to the unique position of barristers because, as I say, it is not unique.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 31 ordered to stand part of the Bill.

Clause 32.—(RECEIPTS AND LOSSES ACCRUING AFTER CHANGE TREATED AS DISCONTINUANCE UNDER FINANCE ACT, 1953, s. 19.)

Mr. Barber: I beg to move, in page 27, line 32, after "change", to insert:
(being debts the benefit of which was assigned to the persons carrying on the trade, profession or vocation after the change)
This Amendment merely puts right a flaw in the drafting. The need arose in this way. Clause 32 makes the successor to a business liable to tax in respect of sums received by him representing post cessational receipts of the old business. As a corollary, it is necessary to provide, as is provided in subsection (3), for the successor to get an allowance for any debt he has taken over at its face value, that is to the extent that he fails to recover it in full.
As provided at present, it is possible for the subsection to be open to the interpretation that a successor to such a business could make such a deduction where the predecessor kept the right to recover the debt. This is to guard against that possibility.

6.0 p.m.

Mr. Mitchison: As far as I know, we have no objection to the Amendment, but I should like to ask the hon. Member a question. This sounds to me to be the sort of case in which there may have been possibilities of fraud or tax avoidance in the past and a deliberate

failure to collect debts. Is that one of the difficulties with which this set of Clauses is intended to deal?

Mr. Barber: As far as I know this Amendment deals merely with the difficulty which could possibly arise—although I do not think that it would—under this Clause. I will look into the question to see whether it has arisen in the past, but I do not know of any instance.

Mr. Mitchison: The kind of case which I have in mind is where someone is carrying on an undertaking and has deliberately failed to collect debts, relying on their coming in after the discontinuance of the business. It would not arise under the provisions of this Clause, but it would be somewhere in this group of Clauses. I am obliged to the hon. Member for saying that he will look into the matter. I merely wanted to be certain that the point is covered.

Mr. Diamond: In looking into the question I hope that the Economic Secretary will be able to confirm that, as well as banisters, everybody else who goes on a cash basis has to give a written statement to the inspector of taxes that he will send in his bills promptly. If he does so he continues to be assessed on cash payments, but if not, whether a barrister or anybody else, the arrangement does not apply.

Mr. Crosland: There has never before been a Finance Bill in which on so many occasions the Treasury Ministers, particularly the two junior Ministers, when points have been put to them, even on Amendments which they have moved, have said that they do not know what the answer is, but will inquire. I think that we should have a little more preparation and homework, particularly on Government Amendments.

Mr. Barber: I was very willing to look into the matter raised by the hon. and learned Member for Kettering (Mr. Mitchison), but in view of what has been said by the hon. Member for Grimsby (Mr. Crosland) it is reasonable that I should point out that the matter which is raised by the Amendment rises solely because of an allowance which it is proposed to give in subsection (3) of the Clause. I should have been quite in order, as the hon. and learned Member


realises, in saying that I would be out of order in dealing with the point which he made. I was only trying to be helpful.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 33.—(WORK IN PROGRESS AT DISCONTINUANCE OF PROFESSIONS AND VOCATIONS.)

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. Douglas Houghton: I never like to see a wasted brief, especially on the Finance Bill, and I am sure that the Government Front Bench will not mind if I ask them what this Clause does and why. It seems to me that it deals with the valuation of work in progress on discontinuance of a profession, similarly to the valuation of stock in trade on the cessation of a business, which is provided for under Section 143 of the Income Tax Act, 1952.
It seems to say that if the work in progress is sold to somebody else, and if the price which is paid for it is debited in the accounts of the purchaser, then an equal amount should be credited to the profession which has ceased. But if there is no such transfer in those circumstances, then the valuation must be at arm's length on market value. That is what my book tells me that this is all about.
Is this to remedy a weakness, or to fill a gap in the law, or is it something which has been going wrong, or have the hands of the Inland Revenue been palsied by the uncertainty of the law? I am sure that we have just enough time to have a most enlightening comment from the Government Front Bench.

Mr. Barber: The purpose of the Clause is almost precisely as the hon. Member for Sowerby (Mr. Houghton) put it. It is to ensure that the valuation of work in progress takes place on a similar basis to the valuation of stock, which is provided for, as he rightly said, under Section 143 of the 1952 Act. There is one difference of significance which I think I ought to point out. As he realises, under the law as it stands, if a profession is discontinued then work in progress is valued according to the cost of the work.
While the hon. Gentleman rightly points out that under the Clause it will be valued under subsection (1) according either to the price received or to the open market, a choice is given under subsection (3), so that the professional man, if he wishes, instead of having his work in progress valued on that basis, may elect to pay at the time, or after the discontinuance, and in respect of discontinuance, tax in respect of the cost of the work in progress; and then, at a later stage, if he disposes of or transfers the work in progress, he would pay the tax on the additional sum as a post-cessation receipt.

Mr. Bruce Milian: Can the Economic Secretary explain exactly what is the "actual cost"? This is rather an indefinite term. It may be prime cost or actual cost including overheads. Is there a recognised definition? I refer him to subsection (3).

Mr. Barber: Again, I must be frank with the Committee. The "actual cost" of the work, as far as I understand it�žI do not know whether this is contained in any other provision of the Income Tax Act�žsimply means the cost to the person concerned of producing the work. That is a question of fact, and if there were any dispute between the Revenue and the taxpayer it would have to be decided by the Appeals Commissioners.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 34.—(DEBTS SET OFF AGAINST PROFITS AND SUBSEQUENTLY RELEASED.)

Motion made and Question propose, That the Clause stand part of the Bill.

Mr. Mitchison: I am a little puzzled by the Clause. Subsection (1) is quite general and has nothing whatever to do with discontinuance, and subsection (2), in effect, applies the same principle as is laid down generally in subsection (1) to discontinuance cases.
Let us assume a man carrying on a trade. He incurs a debt for the purposes of the trade by buying some stock or something of that sort. Afterwards he is


told that he need not pay for it. There-upon the amount which he has not been called upon to pay is taxed as a trade receipt. I could see some reason for this in collusive cases, but what is bothering me is how it will work in non-collusive cases.
Subsection (2) goes on to apply this so that if the man who has incurred the debt has been released from part of it at discontinuance�žassuming him to be on an earnings basis�žhe would have to pay tax on the amount from which he was released. This is a notional payment, and I imagine that the discontinuance can arise in many ways.
Let us take the case of a man who cannot pay because he has "gone broke" I am not talking about a technical bankruptcy, but about a man with no money left. I wonder if the Clause may not be a little wide. I repeat that I can see the possibilities of collusion, and collusion which would result in tax avoidance. If there is no collusion, is it necessary for the purposes of this group of Clauses that the general provision of subsection (1) should be made? I say to the Economic Secretary at once that this is no more than an inquiry. I am a little puzzled by the Clause. Perhaps he can help me.

Mr. Barber: The purpose of the Clause is to deal with an anomaly which arises under the law as it stands at present. If a trader incurs a debt at present, he is allowed a deduction for tax purposes of the amount of the debt. If he subsequently gets the debtor to release him from either all or part of the debt, it has been held by the courts that the amount which is released cannot be brought in for tax purposes, notwithstanding the fact that the trader has had a deduction for the full amount of the debt.
Subsection (1) refers, in the second and third lines, to cases where a deduction has been allowed for tax purposes in respect of the debt. The opening words of subsection (2) are:
If in any such case as aforesaid…
Therefore, subsection (2) applies only to the case where a deduction has been allowed for the debt which was incurred, so that the trader has had a deduction for tax purposes, and at a later stage he is released from his obligation to pay the debt. As there is a qualification, which

by virtue of the opening words of subsection (2) is imported from subsection (1), the hon. and learned Gentleman will agree that it is a fair way of dealing with the matter.

Mr. Mitchison: I am glad that the Economic Secretary mentioned the court decision which had given rise to the trouble. I agree with the reasons he urges for the inclusion of the Clause in the Bill.

Mr. Diamond: I, too, am grateful to the Economic Secretary for explaining so clearly that this Clause is intended to put right an anomaly under which what would have been, in other circumstances, a normal trading receipt is regarded not as a trading receipt but as a capital receipt and, because we have not got a capital gains tax, escapes taxation. This is the tenth anti-tax-avoidance Clause and the eighth one with which we are being troubled solely because we have not got a proper tax structure under which capital gains, equally with income, are taxed.

Sir E. Boyle: Perhaps I might add that we have just listened to the hon. Gentleman's eleventh speech on the subject.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 35.—(PAYMENTS ON RETIREMENT OR REMOVAL FROM OFFICE OR EMPLOYMENT.)

Sir E. Boyle: I beg to move, in page 29, line 39, to leave out "by the person chargeable".
This Amendment, and the Amendment in page 30, line 1, to leave out "included in his emoluments" and to insert:
treated as emoluments of the holder or past holder of the office or employment".
are drafting Amendments, but perhaps I might explain them very briefly to the Committee.
Subsection (4) of the Clause lays down when income is to be treated as received for the purpose of determining the year of assessment. It says that payments are to be treated as income received by the person chargeable on certain dates. This expression is quite all right for the ordinary, straightforward case of a payment received by an employee and assessable on him, but it is not suitable when


the assessment is to be made on executors.
Where executors are chargeable in respect of a payment which is either made to them or was received by the employee in his lifetime but is not assessed to tax, the subsection, as it originally stood, made the payment the emoluments of the executors, arising when the employment came to an end. This was obviously inapt, because the executors did not then exist.
As a result of the first Amendment, the Clause stops short of the time that a payment is to be treated as income received by the person chargeable. The second Amendment ensures that it should be treated as the emoluments of the employee.

Amendment agreed to.

Further Amendment made: In page 30, line 1, leave out "included in his emoluments" and insert:
treated as emoluments of the holder or past holder of the office or employment".—[Sir E. Boyle.]

Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.

6.15 p.m.

Mr. Millan: This is the first Clause dealing with payments to people after retirement, the so-called golden handshakes. Clause 36 also deals with this question, and most of the meat of the argument will probably come on that Clause. Therefore, all I want to do on this Clause is ask two specific questions of the Financial Secretary. They are points of which I am not very clear. Subsection (6) says:
This section does not apply to",
among other things,
(a) a payment made in pursuance of an obligation incurred before that date",
the date being 6th April, 1960.
I have two questions. First, does the phrase "an obligation" import only a legal obligation into the paragraph? We want to deal with questions where there is a legal obligation and not a moral obligation or any other sort of obligation.
Secondly, subsection (6) states that the Clause will not apply to
a payment made in pursuance of an obligation".
The cases here are rather difficult, but in the normal course of things a payment

made in pursuance of an obligation would he chargeable to tax, in the sense that it would arise directly out of the profession, trade or vocation. Subsection (2) says:
This section applies to any payment (not otherwise chargeable to income tax)
In other words, if the existing law is that any payment is chargeable to Income Tax, we are not dealing with it under this Clause.
Subsection (6, a) deals with the kind of payment which in many circumstances at least will already be chargeable to Income Tax. Since it is already excluded under subsection (2), why should it also be excluded under subsection (6, a)? There may be other cases where the payment made in pursuance of an obligation is not chargeable to tax. Will the Financial Secretary or the Solicitor-General tell us briefly the circumstances where that applies?

The Solicitor-General (Sir Jocelyn Simon): The first question asked by the hon. Member for Glasgow, Craigton (Mr. Millan) is whether "obligation" means a legal obligation, or would extend to include a moral obligation. The answer is," No "; it means a legal obligation, a binding obligation. It covers the sort of case where a binding arrangement has been made between an employer and an employee, but no payment has been made before the relevant date.
The hon. Gentleman's second question concerned the mutual relationship between subsections (2) and (6). Subsection (2) excludes any payment which is otherwise chargeable to Income Tax. This is really to ensure that even though the payment falls within subsection (2)—it is not otherwise chargeable to Income Tax—it shall be excluded if the obligation was incurred before Budget day in the circumstances I have described. In other words, the first barrier against the payment falling within the terms of the subsection is that it was otherwise chargeable to tax; but oven if it is not otherwise chargeable to tax, if it was in pursuance of an obligation incurred before Budget day it is still excluded.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 36.—(EXEMPTIONS AND RELIEFS IN RESPECT OF TAX UNDER S. 35.)

Mr. Stevens: I beg to move, in page 31, line 5, at the end to insert:
(e) any payment made from a provident or similar fund to which no contributions have been made by either the employer or the employee in respect of any period after the fourth day of April, nineteen hundred and sixty.
Subsection (1, d) of the Clause exempts from tax charge benefits paid from schemes approved for the purposes of Section 387 of the 1952 Act. During 1947, there was much legislation concerned with retirement benefit schemes which had the effect of freezing the funds of a number of those schemes at that date. Although the funds were frozen then, payments were still being paid from them, and it seems to me that those payments, also, should be exempted in exactly the same way as are payments from funds under Section 387. Can my hon. Friend the Financial Secretary say something about that?

Sir E. Boyle: I can answer my hon. Friend's question very shortly. I take his point. The Amendment is really unnecessary, because any payments of this kind would already be exempted under Clause 35 (6, a). This provision exempts
…a payment made in pursuance of an obligation incurred before that date —
That was the subsection referred to a few minutes ago by the hon. Member for Glasgow, Craigton (Mr. Millan). Clearly, the payments in question fall squarely and beyond question within this provision. In the light of that explanation, and the assurance that I give to my hon. Friend that in view of the drafting of Clause 35 this is an unnecessary Amendment, perhaps he might agree to withdraw it.

Mr. Stevens: On that assurance, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Denzil Freeth: I beg to move, in page 31, line 27, after "which", to insert "either of".

The Temporary Chairman (Mr. George Thomas): This Amendment, and those in page 31, line 28, to leave out "are" and to insert "is", and in line 35, at the end to insert "or", could be discussed together.

Mr. Freeth: Yes, Mr. Thomas.
The purpose of the three Amendments is to ensure that the two main paragraphs, (a) and (b) of subsection (2) should be regarded as alternatives. At present, there seems some slight ambiguity as to whether a person, in order not to be charged with Income Tax would have to fulfil both conditions set down in those paragraphs, whereas it would appear to be more reasonable that the two should be regarded as alternatives—rather on the converse lines of Section 10 of the 1956 Finance Act.

Sir E. Boyle: This is purely a drafting point. I agree that, as drafted, the subsection does not make it quite clear that paragraphs (a) and (b) set out alternative conditions and that it is not necessary for both conditions to be satisfied. I think that, strictly, the matter could be put right simply by the third of my hon. Friend's Amendments, but, in the circumstances, I am quite prepared to advise the Committee to accept all three.

Mr. Millan: Was it the Government's original intention that these should be alternatives? Paragraph (a) refers to "any case," while in (b) there is an additional restriction, as it were, in the case of payments of compensation for loss of office. I must say that I found considerable difficulty in understanding why this additional restriction should have been placed on these payments of compensation for loss of office. Is the simple answer that the Amendment does not make any material difference to what the Government originally intended?

Sir E. Boyle: That is so.

Amendment agreed to.

Further Amendments made: In line 28, leave out "are" and insert "is".

In line 35, at end insert "or".#x2014[Mr. Denzil Freeth.]

Mr. Roy Jenkins: I beg to move, in page 32, line 10, to leave out "five" and to insert "two".
This is our principal Amendment to the Clause and to the subject covered by it and by the preceding Clause, and it would probably be for the convenience of the Committee if, as I believe we can do within the rules of order, we expressed our general attitude to the Clause in the course of dealing with the Amendment.
The Committee will be clearly aware that the Amendment seeks to reduce the exemption limit from £5,000 to £2,000. We are fortified in our desire to do this by the Report of the Royal Commission. Indeed, the way in which the Government have chosen to bring forward their proposals for dealing with what are now generally called "golden handshakes" is, in a sense, typical of the Government's whole approach to dealing with tax avoidance measures in this Bill.
It is certainly the case that to a much greater extent than in preceding Finance Bills the Government have shown a desire to grapple with the problem, and the Chancellor and his colleagues have undoubtedly had a fairly difficult time from their back-bench supporters—if "supporters" is the appropriate word—as a result of this intention. I feel, however, that to a very large extent they have adopted an intermediate course that has given them the worst of both worlds; they have gone far enough to offend many of their supporters, but in many ways have not gone far enough really to deal with the evils to which they have been applying themselves.
That comes out extremely clearly in this Clause. The Royal Commission dealt with the whole question of compensation for loss of office, not at great length—it was fairly succinct and covered the subject in three pages—but it produced a clear analysis of the problem, and clear recommendations. Indeed, the Royal Commission dismissed—" dismissed" is, perhaps, the wrong word, but it did not altogetheraccept—the previous recommendations of the Millard Tucker Committee—and, of course, Sir James Millard Tucker was a valued member of the Royal Commission—partly on the grounds that those recommendations were perhaps rather too complicated.
What the Commission produced was a series of three rather clear-cut recommendations.
6.30 p.m.
First, the Commission recommended that the existing arrangement by which large capital sums paid as compensation for loss of office escaped tax by reason of being treated as capital should certainly be ended, and should be ended in such a way that in future these sums should be taxed as income, except to the extent that, in the first place, one-

quarter of the sum paid, not exceeding £2,000 in any case, should be tax-free. In the second place, the Royal Commission recommended that the non-exempted part of the payment should be charged to tax by top slicing by reference to a period of five years. In the third place, the Commission said that ordinary remuneration from the office or employment in the year of receipt should not be taken into account for the purpose of top slicing.
That was the clear recommendation, not of a minority, but of the Royal Commission as a whole, and in this case I believe that it was unanimous. Having carefully considered the matter, it came to those conclusions which are different from the conclusions at which the Millard Tucker Committee had previously arrived.
The Chancellor has not accepted those conclusions. He has compromised. Some of the changes he has made may be largely technical, designed to put a series of rather bald recommendations into Finance Bill form, but the others are changes of substance which in all cases, I think, are designed to leave the loophole which Clauses 35 and 36 are directed to closing substantially larged than the Royal Commission recommended that it should be.
First, in place of the £2,000 there is the sum of £5,000. Moreover, the difference here extends a little further, since the Chancellor gives an absolute exemption to £5,000 although thte Royal Commission gave exemption to only £2,000 or one-quarter of the total sum, whichever was the larger. I do not, however, think that we should quarrel unduly with the right hon. Gentleman on this point. Our Amendment is designed only to change the £5,000 to £2,000, not to return to the one-quarter or a given sum, whichever is the larger. At any rate, beyond the difference between the £2,000 and the £5,000 there is a certain difference of approach here which is rather more favourable than that recommended by the Royal Commission.
Secondly, as regards the non-exempted part, the Chancellor's proposals, as I understand them, amount, broadly, to top slicing over a period of six years, whereas the Royal Commission said that the period should be five years. Thirdly, the Clause, when taken in conjunction


with its accompanying Schedule, treats superannuation benefits rather more favourably than was envisaged by the Royal Commission. We are not at the moment at liberty to discuss Schedule 4 and the very substantial Amendments—substantial in size, at any rate —which the Chancellor has put down to it, but I take it that it is within the bounds of possibility that the Schedule will be amended as the right hon. Gentleman wishes.
In three respects, the Chancellor has chosen to leave the loophole larger than it should be according to the unanimous view of the Royal Commission. I do not know what are his reasons for doing this. It seems to us that the proposals of the Royal Commission in this respect were extremely reasonable. Two thousand pounds was a sufficient exempted sum, bearing in mind that a sum over and above that amount would not, of course, be wholly taxed but would be subject to a spread-over for six years and that separate treatment would be allowed for any part of it having the nature of a superannuation payment.
We should certainly have much preferred to stand by the recommendations of the Royal Commission on this point. The Government seem very careless of the Royal Commission's recommendations this afternoon. Earlier today, the Attorney-General swept aside what the Royal Commission had to say about barristers, despite the fact that distinguished barristers were heavily represented on the Commission. Here, again, the Government are paying extremely scant respect to the detailed recommendations of a body which considered the matter objectively for a long time and came to certain quite clear decisions.
In a sense, of course, this whole matter and the question which we are now considering stems from the point put yesterday. My hon. Friend the Member for Gloucester (Mr. Diamond), with great force and lucidity, on several occasions showed that a great part of our taxation difficulties and a great part of the taxation difficulties with which we are dealing in this Clause and in other Clauses of the Bill stems from a complete but wholly unreal separation between the treatment of income receipts and the treatment of capital receipts. So long as this completely unreal distinction persists, so long

shall we have great difficulties at the margin, as we have them in this problem with which we are now dealing.
However, we cannot even on the Bill, let alone on this Clause or the Amendment, deal with the whole problem of the relationship between the taxation of capital and the taxation of income, and we must apply ourselves to the possibilities of dealing with this particular issue.
Our view, in accordance with the unanimous view of the Royal Commission, is that the Chancellor would have stopped up the loophole much better if he had accepted the Commission's recommendations. He would have been perfectly fair to the taxpayer. In bringing forward his proposal, he would, I am happy to assume from the rather sparser attendance on the benches opposite today than was the case yesterday, have incurred not quite so much hostility on this matter as on some of the previous Clauses, although, conceivably, the sparseness of attendance today may be due more to the tiredness of hon. Members opposite or the fineness of the weather than to their greater enthusiasm.

Mr. Alan Green: What about the hon. Gentleman's own side?

Mr. Roy Jenkins: It would be most improper for me to turn my back on you, Sir William, in order to gaze at the benches behind me, but I am sure that the benches behind me have been tenanted today by experts on these complicated questions, as they have been throughout our discussions on the Bill. The point at issue is not whether there is a large attendance on the Opposition benches but that, throughout the whole of these tax avoidance Clauses—and to a much greater extent on the others than on this—there has been a phenomenal attendance on the Government benches. Hon. Members have been here in great numbers in order to give their own peculiar brand of support to the Chancellor in the efforts he has been making to stop certain taxation rackets.
It looks as if the hostility may to some extent have exhausted itself, or, at any rate, it is not quite so strong on this issue as on some others. As I say, the right hon. Gentleman would have done much better to go the whole way and accept the recommendations of the


Royal Commission instead of compromising and only half dealing with the problem as he has.

Mr. Freeth: I do not know exactly why it was that the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) sat down with so few supporters behind him—whether it is the weather, their feeling tired or what—but, however many might have turned out to cheer him, it was rather unfair of the hon. Gentleman to criticise my right hon. Friend for not having kept to the recommendations of the Royal Commission since he himself seems perfectly happy to slough off at any rate one of the major recommendations in regard to the alternative method of assessing the tax-free capital sum.
There is one point which the hon. Gentleman totally overlooked and which, in my view, completely vitiates his criticism. Since the publication of the Royal Commission's Report we have had not only the "golden handshake", but the "golden bowler" scheme, as well. By common agreement, I presume, since there are no Amendments down to it, subsection (1) excludes from the operation of the new scheme terminal grants or gratuities given under Royal Warrant to Her Majesty's Armed Forces.
A large number of the grants given as a result of the "golden bowler" scheme to former members of Her Majesty's Forces are in excess of the £2,000 in the Amendment and some in excess of the £5,000 in the Bill. It would be inequitable if we were, on the one hand, to approve as a House that a serving soldier who retires from the Forces for one reason or another is allowed to enjoy a tax-free lump sum whereas a person who has given a lifetime to a company and then severs his connection with it is unable to enjoy a tax-free lump sum of anything like the same amount. I therefore hope that my right hon. Friend will not accept the Amendment moved from the browbeaten benches opposite.

Mr. Millan: I should like to take up the point mentioned by the hon. Member for Basingstoke (Mr. Denzil Freeth). This is probably the line which the Government will take. The hon. Member spoke about someone who has spent a lifetime in the service of a company

being entitled, when he retires or when his employment is terminated for one reason or another, to expect a fairly substantial lump sum. I would point out to him that the Amendment does not eliminate the lump sum altogether. It simply reduces the figure from £5,000 to £2,000 which, as has been said, was the recommendation of the Royal Commission.
Properly to deal with this matter it is necessary that it should be taken in conjunction with the Fourth Schedule, which, as it stands, is almost completely obliterated by an Amendment in the name of the Chancellor of the Exchequer. If we look at the Fourth Schedule as it will eventually be, we find that it is not merely a question of excluding the first £5,000 of any lump sum payment from taxation, but of excluding either the £5,000 or the standard capital superannuation benefit, whichever is the greater.
In the case of a person who has been employed by a company for a lifetime, the sum which will be available as a deduction from the taxable amount will, provided his salary was sufficient, not be £5,000 but the higher sum called the standard capital superannuation benefit. If we must have this other concept of a standard capital superannuation benefit which is precisely related to the length of service of the individual who is retiring or whose employment is being terminated, the argument in favour of the £5,000 is considerably reduced.
The hon. Member referred to men retiring from the Army, but, as I understand, in these cases the amounts paid are related to the length of service. That is precisely why I say that the £5,000 in the Bill is too much. It is not related to length of service. It is possible that someone will have his employment terminated after three or six months or a year, and get a large lump sum payment of which the first £5,000 is tax-free. I can see no real justice in that. If we must accept the principle of a lump sum, I think that £2,000 is quite enough, particularly when it is considered in conjunction with the other provision in respect of standard capital superannuation benefit which would take care of any cases of people with a lifetime of service who are, perhaps, entitled to rather more generous treatment than those who


lose their employment after only a few months or few years' service.
6.45 p.m.
I hope that the Government spokesman will say something about this aspect of the matter. I hope that he will not confine himself to the £5,000 but will say something about the standard capital superannuation benefit, because it seems to me that, having inserted provision for the standard capital superannuation benefit, it is no longer necessary to have this £5,000 in the Bill. I therefore think that the Committee could well accept the Amendment without in any way doing injustice to people who lose their employment after many years of service.

Sir John Barlow: Most of us on this side of the Committee dislike intensely the abuse of the "golden handshake", which has happened occasionally during the last few years. At the same time, we must recognise that certain payments of this character are warranted and, virtually, are necessary. I think that the figure in the Bill is certainly not too high. It may even be too low. When we consider the substantial salaries commanded by some of the great men in industry and the contribution which they make to the good of the country and of industry as a whole, these figures are comparatively small.
I will not go further into the point. I hope that my right hon. Friend will not give way on this matter. I think that the figure is even on the small side.

Mr. Anthony Crosland: I want briefly to take up the point of my hon. Friend the Member for Glasgow, Craigton (Mr. Millan). It is important to the consideration of this Amendment in order to eliminate the idea that we are simply discussing a maximum of £5,000 and a maximum of £2,000. We are not. We are discussing a maximum of £5,000 plus something else on other eventualities. We are concerned with what happens under certain circumstances when lump sum superannuation benefits are paid.
As I understand it, this Clause affects, not superannuation benefits paid under statutory or approved schemes, but ex gratia payments, and that is what we are

discussing. On Second Reading. the Chancellor of the Exchequer, in discussing ex gratia payments, said that there may be paid by way of superannuation payments sums that could be much bigger than £5,000 in appropriate cases. I hope that the Chancellor can tell us what happened with regard to ex gratia payments.
The Royal Commission dealt with this point at considerable length and came to the conclusion, as I should have thought was self-evident, that one should treat compensation for lass of office and ex gratia superannuation payments on the same basis. That is what the Royal Commission attempted to do. On page 79 of its Report it stated:
There is no real dividing line between the two kinds of payment, and if one kind of payment were to be taxed less onerously than the other, it is a practical certainty that future payments would be expressed in whatever form was more favourable to the recipient.
I should have thought tha0t was obvious and one can see the logic of it.
How far does this Clause carry out the Royal Commission's recommendation on ex gratia payments and how far is it a departure from it? It is clearly a departure bath with regard to ex gratia superannuation payments and to the main compensation for loss of office.
There is also, presumably, a further departure from the recommendation of the Royal Commission, because as far as I can see there is nothing to suggest that these ex gratia payments could come to a lump sum or the equivalent of a lump sum substantially larger than the £2,000 which is the tax free element, whereas, according to what the Chancellor of the Exchequer said on Second Reading, these superannuation payments under the Clause could be substantially larger than the £5,000 tax free minimum.
Therefore, two things emerge. First, on the question of these superannuation payments, there is an even greater departure from the Royal Commission recommendations than there is on the main question of compensation for loss of office payments. Secondly, the hon. Member for Basingstoke (Mr. Denzil Freeth) is not giving an accurate picture to the Committee when he suggests that it is simply £2,000 versus £5,000. On the contrary, we are dealing in the Clause with


possible payments that come to much bigger amounts, in the Chancellor's own words, than £5,000.

Mr. Amory: It seems clear from the Amendment that hon. Members opposite are in general agreement with the idea that there should be a fixed exemption limit. What they are disputing is the amount of the limit. Whenever a fixed exemption limit is used, it must be to some extent an arbitrary figure. I do not think it can be said that there is any principle which determines whether, if one is adopting the alternative of a fixed rate, the figure should be £2,000, £5,000, £10,000 or some other figure. One has to look at the objects at which the legislation is aimed and to decide what figure seems to accord best in practice with those objects.
As I have said before, one of the main objects which I have had in mind in making these proposals is to deal with the very large sums which have been paid in a number of cases in recent years. The tendency for these payments to get bigger and bigger as time goes on and also to become more frequent is very apparent. On the other hand, I do not want to catch the modest and quite genuine payments which are made to employees of all kinds who, for instance, become redundant on the reorganisation of an industry or as a result of changes in certain businesses.
It is natural that such compensation should bear some relation to the remuneration which the individual was getting. It would not be at all unreasonable that if an employee in the middle range of income was displaced through no fault of his own, he should get a payment of substantially more than £2,000. In practice, if we look at all the cases that we are trying to meet, we should decide objectively that £2,000 would not be high enough.
Hardship in cases of redundancy is not limited entirely to the lower income levels. Reorganisation can also hit severely managers and administrative executives in middle life. Many of those men when displaced would find it by no means easy to get other jobs in line with their experience. Those types of people will often have financial commitments which make thing difficult for them during the period before they can get fresh employment. In many cases, it is much harder for

them to get fresh employment than for many others at a lower income level.
This is, I repeat, not the kind of payment at which these provisions are aimed. Most people would agree that the fairest thing to do is to exclude from the operation of the Clause all these kinds of cases that we are thinking of by fixing a limit such as £5,000.
There has also been criticism that the exemption limit is too low. I have had that criticism from outside this Committee as well as inside it. One can make a substantal case for justifying a higher figure. It has been said that £5,000 to a highly paid employee might be perfectly genuine and reasonable. As I have said, that may well be so. I would not suggest that all payments in excess of £5,000 are extravagant or unjustified. In certain circumstances, the Clause already recognises that a greater payment than £5,000 may be reasonably let out if it is measured by reference to years of service and retiring pay. I will have a word to say about that presently.
The Bill does not limit lump sums paid under approved superannuation schemes. They may amount, in addition to the pension, to three-eightieths of the final salary for each year of service—that is, salary and a half for forty years' service. Where there is past service but no superannuation scheme and the payment is a voluntary one, the Bill frees from tax a lump sum equivalent to one-twentieth of the final salary, averaged over three years, for each year's service. That is equivalent to the final salary over twenty years', or twice the final salary after forty years', service.
When, however, we are thinking of a payment outside these provisions, made at the discretion of the employer and which might reach amounts above £5,000, I believe that there will be a general feeling that at least some tax ought to be paid. The reliefs which are provided in the Fourth Schedule will ensure that the burden of tax on payments in excess of £5,000 is not likely to be onerous. That is the arrangement for spreading, "top slicing" as it is called.
It has been suggested to me that instead of a fixed exemption limit, there should be a sliding scale under which there would be an exemption up to, say,


twice the employee's remuneration. This would take account of one of the factors which determine the question whether any particular terminal payment is reasonable: that is to say, the remuneration which the employee has hitherto enjoyed. There is a superficial attraction about that sliding scale, but it would add greatly to the complications of the scheme in relation to cases in which more than one payment is made.
Moreover, my own feeling is that if an employee who has been getting £10,000 a year receives a terminal payment of £20,000 and the case is not one of a standard capital superannuation benefit calculated on past years of service, it would be over-generous to exempt such a payment from tax altogether.
Therefore, for pragmatic reasons and after considering all the different kinds of cases that we would wish to exempt, I came to the conclusion that a figure of £5,000 was the best and the one that I could most confidently recommend to the Committee. I am rather fortified in my opinion by the thought that that figure has been criticised from both sides, from one side on the ground that it is rather too high and from the other side on the ground that it is rather too low. That fortifies my opinion that it is probably about right.
The hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) asked whether it was not true that I was recommending a spreading more generous than that suggested by the Royal Commission. That is so. I am recommending spreading over six years as against the five years suggested by the Royal Commission. The hon. Member asked the reason. The Royal Commission's recommendations covered the rather wider ground than this question alone. The Commission made recommendations which would have brought greater relief to contributions and also greater relief to the income arising from the invested contributions. We cannot, therefore, make a fair comparison.
7.0 p.m.
The hon. Member for Glasgow, Craig-ton (Mr. Millan) asked me to say a word about the standard capital superannuation benefit which is exempted by paragraph 3 of the Schedule. That can reach

a much higher figure than the £5,000. It is directly related to past service and the figures we have worked out here and included are intended to relate that and bring it on to a fair comparative basis with the amounts allowed free of tax under the approved superannuation schemes. I think that that is a reasonable way to tackle it.
I should like to emphasise two points in connection with the standard capital superannuation benefit. The first is that it only applies to voluntary payments and is not deductible from payment or compensation for loss of office. The second is that it is not given in addition to the £5,000 exemption and, in effect, the employee gets whichever is the higher, the £5,000 or the standard capital superannuation benefit.
After listening to all that hon. Gentlemen opposite have said, and particularly to the hon. Gentleman the Member for Stechford, I still feel that the figure I would wish to recommend with confidence to the Committee as the one which I think will do broad justice and give exemption to all the different kind of cases to which we would wish exemption to apply is the figure that stands in the Clause.

Mr. Harold Wilson: The right hon. Gentleman began by saying that whatever figure we put in the Clause must be an arbitrary one. I do not think that he has satisfactorily explained on what arbitrary basis he chose the figure of £5,000. The only thing that is clear is that he has rejected the advice of the Royal Commission. We all know that the Radcliffe Committee has become a dirty word in Tory terminology so far as monetary policy is concerned, but we would have thought that the Chancellor would have more respect for the Royal Commission presided over by the noble Lord, Lord Radcliffe, and not be so anxious to throw over so many important recommendations of that Commission.
The suggestion has been made this afternoon that we on this side of the Committee are mean about the figure of £2,000. This is not a political matter. No one can say that the figure of £2,000 was recommended by the Radcliffe Royal Commission for political reasons. It was certainly not a politically constituted Royal Commission. It may


have been appointed by my right hon. Friend the present Leader of the Opposition, but I have never heard it criticised by anyone for leaning over in a Socialist direction. Quite the reverse. It includes some very distinguished businessmen and lawyers, who are not the sort of people likely to recommend too low a figure in respect of this "golden handshake." We have the rejection of that Report by the Chancellor.
The Chancellor told us that he thought that the figure of £5,000 was about right because it has been criticised as too high by some hon. and right hon. Gentlemen in the Committee and because it has been criticised as being too low not only by voices inside this Committee but by voices outside it. We know where those voices made themselves heard. It was not in this Committee. It was in the Committee to which the Chancellor pays far more attention in framing his taxation proposals—the 1922 Committee. There was no suggestion in the Budget speech that this was to be the figure. This was put in the Bill, together with a large number of other rather renegade suggestions, only after an interval in which Conservative opinion inside and outside the House was able to make itself felt.
In turning to the wider aspects of the subject arising from the Amendment, I ought perhaps to make one disclaimer. I have been referred to in the Press as the inventor of the phrase "the golden handshake". I cannot lay claim to that. I think that I was the first to use it in this House last June, but the phrase was in general use in the City and in business circles long before it was used in this House. Nevertheless, since this matter was brought into public discussion rather less than a year ago, more and more people have been realising what a terrible scandal it is.
A year ago I gave figures of eleven cases of directors eased out mostly under take-over bids—in one or two cases after board room rows—and the total amount of "golden handshake" compensation paid to the eleven characters was £575,000, an average figure of £52,000 or £53,000 each. Since this is more than Manchester City paid to Huddersfield for Mr. Law, an eminent inside right, it shows the monstrous sense

of values developing in the business community.
When we debated some of these takeover bids—we had a number of Questions on it last year and a big debate last June—Ministers said that take-over bids were good things and enabled one to ease out directors who were failing a company—failing to make it as profitable as it should be. Those people who on the Minister's argument had failed and were not worthy of their jobs and had therefore been eased out have been given £50,000, £60,000, £70,000 and £80,000 which, until this Clause is law, will be tax-free. Even so, with the rather generous terms that the Chancellor is putting forward in this Clause—he reminded us that it is not only a question of £5,000—still too much is being given tax-free.
The last time we debated the golden handshakes I got into trouble with hon. Members opposite for referring to a brewer who was eased out and given £50,000 or £60,000. I asked why he should be given that tax-free. I said that as an ex-Tory M.P. he would get a job fairly easily. Hon Members opposite suggested that this was an unworthy and unjustifiable remark, but I noticed that this gentleman got a job within a couple of weeks of that speech with the brewery company which had bought out the one which had compensated him. I think that my remarks were prophetic and not irrelevant to this situation.
I thought that the right hon. Gentleman dismissed rather easily this afternoon the problem of different income groups. He said, in a rather complacent way, that when there is a reorganisation scheme and managers and directors are eased out it is often harder for them to find other jobs than it is for the lower income groups. I wish that the right hon. Gentleman would go to a number of constituencies which I could suggest to him and which some of my Scottish hon. Friends could suggest to him—he might even go to some of the Lancashire cotton towns—and try to compare the ease with which unemployed mule spinners, for example, can get a job compared with some of the redundant directors to whom I referred last year. It would be interesting to see how many of those to whom I referred last year have got jobs at higher rates


of salary. In one of the most spectacular cases there has been re-employment at a very high salary indeed.

Mr. Amory: I was referring to the intermediate group—the middle income group—representing managers, adminis-trative people and executives. Those were the categories I was speaking about.

Mr. Wilson: I know that there is a very big problem, especially in middle life, for managers and other senior people to find jobs. I hope, however, the right hon. Gentleman will not suggest that it is harder for them in every case than for the lower income groups. In particular, I would suggest to him that he probably tends to underestimate the difficulty in finding work among clerical workers and a large number of white collared workers who are the young managers and top executives and who find it harder to get work than almost anyone else in almost any part of the country and not merely in the depressed areas to which I have referred.
The fact remains that the Conservative Party and the Chancellor of the Exchequer seem to think that it is fair that these "golden handshakes" should be continued, but they have at last, after a lot of pressure, come around to our way of thinking that it is unfair that these amounts should be paid tax free.
However, the Chancellor really must not try to delude himself into thinking that he is solving the problem of inequality caused by these payments. The mere fact that the Chancellor is being assailed by hon. Gentlemen behind him does not mean that he is pursuing a policy of social justice. It merely means that they are even more socially unjust than he is, and we have seen this developing in the debates of the last day or two.
The Chancellor still thinks it is right that these people should get away with these things. He is allowing tax to be spread out over six years—more than the Royal Commission suggested; and yet no one is more stony-hearted when any one comes along with a compensation proposal for which the Chancellor of the Exchequer has to find the money. We remember the trouble and struggle we had last year to produce even the

smallest compensation payments for unemployed cotton workers at a time when the owners of cotton mills were being lavishly subsidised for scrapping mills and equipment. The Minister of Aviation only this week sternly rejected any proposal that the workers losing their jobs through the cancellation of Blue Streak should get compensation. He rejected it, even though the whole thing is the result of Government policy.

Mr. Sydney Silverman: May I remind my right hon. Friend that, in the case of the cotton workers, as to part of their compensation, they lose it if they get another job?

Mr. Wilson: Yes, my hon. Friend is quite right, and I am glad he mentioned that. I think I did make a point of that in the debate last June, whereas in the cases which I have mentioned, when those men get another job they have already got nice tax-free "golden handshakes" tucked away.
There is one last point I want to make. The Chancellor, as I say, is tackling this problem only at the margin. I must say that I myself am very suspicious about some of these "golden handshakes". Many of them, I agree, are genuine; they are thoroughly genuine and thoroughly justified, provided they bear a fair rate of tax. I do not think we can speak as we were yesterday, when we were dealing almost exclusively with Clauses designed to deal with tax avoidance sharks. I think it is fair to say, what many hon. Members said, I think wrongly, yesterday, that it is a question of holding the balance between the nice, decent taxpayers on the one hand and the sharks on the other. There are among these people many honest, decent men, as we all know, but there are some sharks as well, and there have been some very seamy cases involved. Some take-over bids of which we have read in recent months and years have been extremely sordid and squalid. Many of them are in the courts, and, therefore, are sub judice, and it is not for me to go into the details now.
But, even so, I think there is something wrong where a director can come along and say to his fellow shareholders that they should accept the bid of Mr. X or Mr. Y, who may be making, perhaps,


a fairly generous bid for the shares, remembering that the director's advice is bound to have a very big influence on the independent shareholders, if one then finds that the director in question, on concluding the deal, goes out of the business with a lavish tax-free golden handshake. I think there is something there extremely suspicious, which might involve corruption on a very big scale. I think that this may be much more appropriate to the Jenkins Committee, but I hope that the Chancellor of the Exchequer views this very seriously, because I think that it affects business morality to a considerable extent. I am not referring to my hon. Friend the

Member for Birmingham, Stechford (Mr. Roy Jenkins) who moved the Amendment. That is another Jenkins.

However, having said that, having said that this is a matter for the Committee appointed by the President of the Board of Trade, I still feel that this does give us another reason why this Committee should be extremely scrupulous in examining a concession which will still be allowed, even after this Clause has gone into law, to the recipients of these golden handshakes".

Question put, That "five" stand part of the Clause:—

The Committee divided: Ayes 174, Noes 106.

Division No. 96.]
AYES
[7.15 p.m.


Agnew, Sir Peter
Finlay, Graeme
Maddan, Martin


Aitken, W. T.
Fisher, Nigel
Manningham-Buller, Rt. Hn. Sir R.


Allason, James
Fletcher-Cooke, Charles
Markham, Major Sir Frank


Alport, C. J. M.
Fraser, Ian (Plymouth, Sutton)
Marshall, Douglas


Amory, Rt. Hn. D. Heathcoat (Tiv'tn)
Freeth, Denzil
Marten, Nell


Atkins, Humphrey
Gammans, Lady
Mathew, Robert (Honiton)


Balniel, Lord
Gardner, Edward
Matthews, Gordon (Meriden)


Barber, Anthony
Clyn, Sir Richard (Dorset, N.)
Maydon, Lt.-Comdr. S. L. C.


Barlow, Sir John
Goodhart, Philip
Mott-Radclyffe, Sir Charles


Barter, John
Goodhew, Victor
Nabarro, Gerald


Beamish, Col. Tufton
Grant, Rt. Hon. William (Woodside)
Neave, Airey


Bell, Philip (Bolton, E.)
Grant-Ferris, Wg Cdr. R. (Nantwich)
Noble, Michael


Bell, Ronald (S. Bucks)
Green, Alan
Osborn, John (Hallam)


Bennett, F. M. (Torquay)
Gresham Cooke, R.
Page, Graham


Biggs-Davison, John
Grosvenor, Lt.-Col. R. G.
Pannell, Norman (Kirkdale)


Bingham, R. M.
Hamilton, Michael (Wellingborough)
Pearson, Frank (Clitheroe)


Bishop, F. P.
Harris, Frederic (Croydon, N.W.)
Peel, John


Black, Sir Cyril
Harris, Reader (Heston)
Pickthorn, Sir Kenneth


Bourne-Arton, A.
Harrison, Brian (Maiden)
Pitt, Miss Edith


Box, Donald
Harrison, Col. J. H. (Eye)
Powell, J. Enoch


Boyle, Sir Edward
Harvey, John (Walthamstow, E.)
Prior-Palmer, Brig. Sir Otho


Braine, Bernard
Harvie Anderson, Miss
Proudfoot, Wilfred


Bromley-Davenport, Lt.-Col. W. H.
Heald, Rt. Hon. Sir Lionel
Rees, Hugh


Brooman- White, R.
Hendry, Forbes
Rees-Davies, W. R.


Bullus, Wing Commander Eric
Hiley, Joseph
Ridley, Hon. Nicholas


Burden, F. A.
Hill, J. B. B. (S. Norfolk)
Ridsdale, Julian


Carr, Compton (Barons Court)
Hinchingbrooke, Viscount
Roots, William


Cary, Sir Robert
Hobson, John
Russell, Ronald


Channon, H. P. G.
Holland, Philip
Scott-Hopkins, James


Chataway, Christopher
Hopkins, Alan
Shaw, M.


Chichester-Clark, R.
Hornby, R. P.
Simon, Sir Jocelyn


Clark, Henry (Antrim, N.)
Howard, Gerald (Cambridgeshire)
Smith, Dudley (Br'ntf'rd amp; Chiswick)


Clark, William (Nottingham, S.)
Howard, Hon. G. R. (St. Ives)
Smithers, Peter


Cleaver, Leonard
Hughes-Young, Michael
Smyth, Brig. Sir John (Norwood)


Collard, Richard
Hutchison, Michael Clark
Spearman, Sir Alexander


Cordeaux, Lt.-Col. J. K.
Iremonger, T. L.
Speir, Rupert


Corfield, F. V.
Irvine, Bryant Godman (Rye)
Studholme, Sir Henry


Courtney, Cdr. Anthony
James, David
Sumner, Donald (Orpington)


Critchley, Julian
Johnson, Dr. Donald (Carlisle)
Temple, John M.


Crosthwaite-Eyre, Col. O. E.
Johnson, Eric (Blackley)
Thatcher, Mrs. Margaret


Crowder, F. P.
Kerans, Cdr. J. S.
Thomas, Peter (Conway)


Cunningham, Knox
Kershaw, Anthony
Thompson, Richard (Croydon, S.)


Curran, Charles
Kirk, Peter
Thorneycroft, Rt. Hon. Peter


Currie, G. B. H.
Kitson, Timothy
Thornton-Kemsley, Sir Colin


Dalkeith, Earl of
Lambton, Viscount
Tilney, John (Wavertree)


d'Avigdor-Goldsmid, Sir Henry
Legh, Hon. Peter (Petersfield)
Turner, Colin


Deedes, W. F.
Lewis, Kenneth (Rutland)
Turton, Rt. Hon. R. H.


de Ferranti, Basil
Lilley, F. J. P.
van Straubenzee, W. R.


Digby, Simon Wingfield
Linstead, Sir Hugh
Vane, W. M. F.


Doughty, Charles
Loveys, Walter H.
Vaughan-Morgan, Sir John


Drayson, G. B
Lucas, Sir Jocelyn (Portsmouth, S.)
Vickers, Miss Joan


du Cann, Edward
Lucas-Tooth, Sir Hugh
Wakefield, Edward (Derbyshire, W.)


Duthie, Sir William
McAdden, Stephen
Ward, Dame Irene (Tynemouth)


Errington, Sir Eric
MacArthur, Ian
Webster, David


Farey-Jones, F. W.
McLaren, Martin
Wells, John (Maidstone)


Farr, John
Maclean, Sir Fitzroy (Bute amp; N. Ayrs.)
Wilson, Geoffrey (Truro)




Wise, A. R.
Woollam, John
TELLERS FOR THE AYES:


Wolrige-Gordon, Patrick
Worsley, Marcus
Mr. Gibson-Watt and Mr. Whitelaw.


Woodnutt, Mark
Yates, William (The Wrekin)





NOES


Ainsley, William
Hall, Rt. Hon. Glenvil (Colne Valley)
Pavitt, Laurence


Albu, Austen
Hamilton, William (West Fife)
Peart, Frederick


Allen, Scholefield (Crewe)
Hannan, William
Plummer, Sir Leslie


Benn, Hn. A. Wedgwood (Brist'l, S. E.)
Hayman, F. H.
Proctor, W. T.


Benson, Sir George
Henderson, Rt. Hn. Arthur (Rwly Regis)
Redhead, E. C.


Blackburn, F.
Holman, Percy
Reynolds, G. W.


Blyton, William
Houghton, Douglas
Rogers, G. H. R. (Kensington, N.)


Bowen, Roderic (Cardigan)
Hughes, Emrys (S. Ayrshire)
Ross, William


Brockway, A. Fenner
Hunter, A. E.
Silverman, Julius (Aston)


Broughton, Dr. A. D. D.
Hynd, H. (Accrington)
Silverman, Sydney (Nelson)


Butler, Herbert (Hackney, C.)
Hynd, John (Attercliffe)
Skeffington, Arthur


Callaghan, James
Irving, Sydney (Dartford)
Smith, Ellis (Stoke, S.)


Castle, Mrs. Barbara
Jay, Rt. Hon. Douglas
Snow, Julian


Corbet, Mrs. Freda
Jenkins, Roy (Stechford)
Sorensen, R. W.


Crosland, Anthony
Johnson, Carol (Lewisham, S.)
Steele, Thomas


Grossman, R. H. S.
Johnston, Douglas (Paisley)
Stones, William


Deer, George
Jones, Dan (Burnley)
Summerskill, Dr. Rt. Hon. Edith


Dempsey, James
Key, Rt. Hon. C. W.
Swingler, Stephen


Diamond, John
King, Dr. Horace
Taylor, John (West Lothian)


Dodds, Norman
Lawson, George
Thompson, Dr. Alan (Dunfermline)


Dugdale, Rt. Hon. John
Lewis, Arthur (West Ham, N.)
Thomson, G. M. (Dundee, E.)


Ede, Rt. Hon. Chuter
Mabon, Dr. J. Dickson
Wade, Donald


Edwards, Walter (Stepney)
McInnes, James
Warbey, William


Evans, Albert
McKay, John (Wallsend)
Weitzman, David


Fernyhough, E.
McLeavy, Frank
Wells, Percy (Faversham)


Fitch, Alan
Marquand, Rt. Hon. H. A.
Wells, William (Walsall, N.)


Fletcher, Eric
Mendelson, J. J.
Wheeldon, W. E.


Foot, Dingle
Millan, Bruce
White, Mrs. Eirene


Forman, J. C.
Mitchison, G. R.
Wilkins, W. A.


Fraser, Thomas (Hamilton)
Morris, John
Williams, W. R. (Openshaw)


Ginsburg, David
Moyle, Arthur
Willis, E. G. (Edinburgh, E.)


Gordon Walker, Rt. Hon. P. C.
Noel-Baker, Rt. Hn. Philip (Derby, S.)
Wilson, Rt. Hon. Harold (Huyton)


Greenwood, Anthony
Oliver, G. H.
Woof, Robert


Griffiths, Rt. Hon. James (Llanelly)
Oram, A. E.
Zilliacus, K.


Grimond, J.
Padley, W. E.



Hale, Leslie (Oldham, W.)
Paton, John
TELLERS FOR THE NOES:




Mr. Cronin and Mr. Probert.

The Solicitor-General: I beg to move, in page 32, line 13, to leave out from "payments" to the end of line 19 and to insert:
in respect of which tax is chargeable by virtue of that section, or would be so chargeable apart from the foregoing provisions of this subsection, are made to or in respect of the same person in respect of the same office or employment, or in respect of different offices or employments held under the same employer or under associated employers, this subsection shall apply as if those payments were a single payment of an amount equal to that aggregate amount; and the amount of any one payment chargeable to tax shall be ascertained as follows, that is to say—

(a) where the payments are treated as income of different years of assessment, the said sum of five thousand pounds shall be deducted from a payment treated as income of an earlier year before any payment treated as income of a later year; and
(b) subject as aforesaid, the said sum shall be deducted rateably from the payments according to their respective amounts".

The Amendment is designed to make the proviso to subsection (3) work properly in various sets of circumstances. At the moment, it is technically defective. I will not worry the Committee with that, but it also fails to take into

account certain circumstances which ought to be taken into account. Its object is to aggregate in certain circumstances two or more payments so that only one £5,000 deduction is allowed.
The circumstances which at present are taken into account are those where two payments are in respect of the same employment; for example, when one payment is made to compensate for a reduction in the emoluments of employment and the other where an employment is officially terminated. Secondly, there is the case where two payments are made in respect of separate offices under the same employer; for example, where one person occupies the posts of both secretary and director of a company and receives compensation in respect of each of those offices.
But there are two other types of case in addition to those I have mentioned which we ought to take into account. The first is where one payment is made by one employer and another by an associated employer. For example, a man could be a director of a number of companies in the same group and it


would be clearly wrong that he should be able to get up to £5,000 free of tax out of each of those. Subsection (5) deals with the associated employers, but does not cover all types of case and we are amending it in a later Amendment. As part of the process of amendment it is proposed to include a reference to associated persons in subsection (3) and to define the expression in the new subsection (5).
The second type of case which we have not taken into account at the moment is where payment is made to the executors of an employee who had died when he has already received a payment in his lifetime. To make quite sure that that case is covered there occur in the Amendment the words
…or in respect of the same person …
The subsection as drafted also omitted to say how the £5,000 was to be allocated between two of more payments. As the Committee will appreciate, that may be necessary because the payments may be taxed in different years, and even if they are taxed in the same year they may qualify for different reliefs.
The Amendment proposes to lay down two rules for determining the allocation. Where the payments are treated as income of different years the deduction should be given for the earliest year. The reason for that is that it avoids having to reopen settled liabilities when the second payment is made. But where the payments are treated as income of the same year the deduction is to be allocated rateably among the payments.

Mr. Diamond: May I ask two questions? I assure the Solicitor-General that this is for information only, because unless one has read the whole Clause and the Amendments in great detail it is very easy not to be aware of all the effects of the detailed conditions.
The first question is about the allocation of the £5,000. The £5,000 is not simply £5,000, but a minimum of £5,000, and that might apply in some circumstances, but, in other circumstances, might not apply at all. Where there are two amounts of compensation being paid in such circumstances where in one case the minimum of £5,000 would not apply at all, because it was covered by the other calculation, is the sum of £5,000 to

be allowed in one case and the other basis of calculation in the other?
7.30 p.m.
The second question is what provision is there for the prevention of one person receiving more than one compensation from different employers who are not associated? The case to which my right hon. Friend referred was a case of associated companies, but the assumption behind this payment of compensation is that the person loses his job and does not get another job for some time at least, and in certain cases for a long time.
The racket is being covered in the case of associated employers, but what about the case of a man who goes from job to job and collects payments of compensation each time? These, apparently, are not covered, and he can get the full amount of £5,000 each time he is good enough to get a job and not good enough to keep it.

The Solicitor-General: I hope that the hon. Gentleman will excuse me from answering his first question. I should like to look into it and see how that works out under the Clause as amended.
On the second question, the hon. Gentleman is right. I do not think that the payment would attract the Clause at all, but there is a later Amendment which deals with a redraft of the definition of an associated person.

Mr. Millan: I am surprised at the reply to the first point made by my hon. Friend the Member for Gloucester (Mr. Diamond). My understanding of the Fourth Schedule is that the point made by my hon. Friend is dealt with there in great detail and with great complexity. Why has the Solicitor-General to look into this if it is in the Fourth Schedule? If it is not in the Fourth Schedule, what is the Schedule for?

The Solicitor-General: In that case, we can consider the matter when we come to the Fourth Schedule, and I am glad to say that my hon. Friend the Economic Secretary will be dealing with it.

Amendment agreed to.

The Solicitor-General: I beg to move Amendment No. 174. Would it be convenient to discuss also Amendment No. 175, which is an associated Amendment?

The Temporary Chairman (Mr. John Arbuthnot): Yes.

Mr. H. Wilson: On a point of order. It has become common practice to number the Amendments. That is done as a matter of convenience to the Committee, but surely it is not in order for the learned Solicitor-General to move an Amendment by referring to its number and not giving the Clause to which it refers and moving it in the usual way?

The Temporary Chairman: No doubt the Solicitor-General will move the Amendment in the normal form in the course of his speech.

The Solicitor-General: I think that on the last occasion I ended with the usual form, but so that there shall be no doubt I will start with the usual formula.
I beg to move, in page 32, line 29, to leave out subsection (5) and to insert:
(5) For the Purposes of this section and of the Fourth Schedule to this Act, offices or employments in respect of which payments to which the last foregoing section applies are made shall be treated as held under associated employers if, on the date which is the relevant date in relation to any of those payments, one of those employers is under the control of the other or of a third person who controls or is under the control of the other on that or any other such date.
Would it be convenient to discuss, also, the Amendment in page 32, line 42, at the end to insert:
or to a person controlling or controlled by an employer".

The Temporary Chairman: Yes.

The Solicitor-General: The object of the Amendment is to make sure that two deductions of £5,000 are not given in certain circumstances where it would be wrong for them to be given. If a man gets two separate payments connected with two employments under two quite separate employers he will be entitled to a deduction of £5,000 against each payment. That was the case which the hon. Member for Gloucester (Mr. Diamond) put to me.
If the two employers are associated, that is, if one is under the control of the other, or both are under the control of a third person, only one deduction of £5,000 should be allowable. A case that will obviously occur to the Committee is that of a director of two or more com-

panies in the same group. Subsection (5) as drafted dealt with the situation by providing that two payments should be treated as having been made by the same employer if one payment was made by the employer who at the date of either of the events with which the payments were connected was associated with the employer who made the other payment, and it went on to define the term "associated with" as referring to persons one of whom controlled the other, or who were under the same control.
But the subsection as drafted does not cover the case where a payment is made by one company in year 1, and another company in year 3, both companies being members of the same group in their respective years, but where there is a reconstruction of the group in between. The reason is, of course, that they are not both members of the same group at either of the relevant dates.
For example, company A makes a payment to an employee in year 1 when it is a subsidiary of company B. In year 3 company B makes a payment to the same employee at a date when it has just become a subsidiary of company P. In the meantime, by the time company B has become a member of the group, company A has gone into liquidation. That case is not covered, because at neither relevant date were both A and B under the control of P, and the Clause as drafted would allow more than one payment of £5,000 to be exempt in circumstances where it would obviously be unfair for that to occur.
The subsection as redrafted, together with the proviso to subsection (3) as amended, remedies the omission to deal with that type of case.

Amendment agreed to.

Further Amendment made: In page 32, line 42, at end insert "or to a person controlling or controlled by an employer".—[The Solicitor-General.]

Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. Powell: I think that it would be wrong for the Clause to be added to the Bill without allusion being made to a very important matter which it involves.


If you look at subsection (1, a), Mr. Arbuthnot, you will see a reference to a payment made
… on account of injury to or disability of the holder of an office or employment.
If we add the Clause to the Bill the result will be that any such payment as that will not attract tax and I gather that there is no disagreement on either side of he Committee that a payment of that sort ought not to create a liability to tax.
If that is the view of the Committee, such a view implies that we regard that payment as compensation for a capital loss suffered by the person to whom it is made. He has suffered an irreplaceable capital loss of the ability to earn. By putting this into the Clause, we are declaring our opinion that being a capital loss no compensation in respect of it should be taxable.
It should follow logically again from that view of this Committee that in assessing, what compensation should be paid in those circumstances the prospective earnings of a person injured or disabled should not be reduced by reference to the hypothetical tax which he would have paid on those earnings if he had not been disabled or injured and had gone on to earn them. Unfortunately, even when we have added this Clause to the Bill, that will continue to be the position as long as this matter is governed by the decision of another place in the case of the British Transport Commission v. Gourley.
You will recollect, Mr. Arbuthnot, that in that case the compensation awarded to that late and distinguished engineer was reduced on appeal from the sum of some £37,000 to a sum of between £6,000 and £7,000, on the ground that allowance ought to be made, in computing the sum, for the tax which he would have paid had he not been injured but continued to earn at his full earning capacity.
The payment of compensation in the cases where payments of the kind described in subsection (1, a) fall to be made is at present governed, and will be governed unless Parliament does something about it, by the decision in Gourley, and the effect will be, if that situation continues, practically to frustrate what we are doing here and to defeat the declared and clear intention of the Committee. It will mean that,

although we have stated that we regard this as a capital sum not taxable, it will reach the recipient only after, in effect, the deduction of tax.
What is at least equally important is that it will put a dangerous weapon into the hands of the employer, who may be negotiating for a settlement out of court with the disabled or injured employee, for he will be able to say to him, offering him a sum which is manifestly inadequate, "If you do not like the sum I am offering, you can take the matter to court, but I may warn you that if you do take it to court, you will find"—see Gourley "that the —sum you will be awarded will be severely reduced in regard to your potential tax liability" This is a matter which could seriously affect literally hundreds of thousands of people, from the most high salaried to the most humble, to varying degrees.
It is something which should be of concern to all hon. Members, not least to those who are connected with trade unions, no small part of whose work is in connection with cases of this sort. It would be wrong for us to part with the Clause until we have heard from my hon. Friends and right hon. Friends on the Treasury Bench some recognition of the relationship between what we are doing here and the decision in Gourley and some indication that the quite unsatisfactory position which that present relationship represents will, at no distant date, be remedied.

7.45 p.m.

The Solicitor-General: It may help the Committee if I intervene at this stage on the very important topic which my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) has raised. We recognise that this provision has a bearing on Gourley's case. On the other hand, it would clearly be quite unsuitable to use the Finance Bill to legislate on the decision in Gourley's case. My own guess is that the courts will not proceed on the basis that Gourley is unaffected by the Bill. The courts may well say that Clause 36 (1, a) strikes at the very ratio decidendi in Gourley and they may well go back to awarding gross damages, not net of tax, in the sort of case which my hon. Friend postulated.

Mr. Powell: My hon. and learned Friend of course recollects that in the discussion on the Gourlay case in another place it was common ground between both parties that the sum as awarded would not attract tax in the way that is provided in this Clause, so I find it difficult to share my hon. and learned Friend's conviction.

The Solicitor-General: I did not put it as high as a conviction, but it is a distinct possibility that that will be the approach of the courts. My noble and learned Friend the Lord Chancellor, particularly in the light of this new provision, will keep the matter under review with a view to legislation. I think that it would be desirable to see how the courts react to this provision. My noble and learned Friend's freedom of manoeuvre is not increased by the fact that his Law Reform Committee not only disagreed on its recommendations of what should be done on the Gourley decision, but split into three separate groups. However, I think that this brings a fresh factor in that situation.
The courts may well decide that this provision strikes at the basis of the decision in Gourley's case. I assure my hon. Friend that we will watch the situation very carefully and that my noble and learned Friend has the possibility of legislation in mind.

Mr. Mitchison: I am sorry that the hon. and learned Gentleman was not able to wait for me to ask him some questions, but perhaps he will now answer them when put to him. I find Gourley's case somewhat off the point here. What we are discussing is whether tax should be charged under the previous Clause in respect of payments on the termination of an office or employment.

Mr. Powell: No. We are discussing a payment
made … on account of injury to or disability of the holder of an office or employment 
the words are disjunctive.

Mr. Mitchison: What we are discussing is payments
made in connection with the termination of … an office or employment by the death of the holder, or made on account of injury to or disability of the holder of an office or employment.

All that the Clause does is to provide that tax is not to be charged on such payment.
I do not see how the Gourley case comes into the picture. When the courts have to assess damages in these cases they will take account of the change of the law made by this provision and it is not for us in this Finance Bill to tell them what they should do about it, unless we know quite clearly something which is within the scope of the Finance Bill and which we think requires to be done.
Is it not the position in respect of the Gourley case that something which was previously taxable and in respect of the taxability of which some damages were assessed in certain circumstances now becomes no longer taxable? Accordingly, it seems impossible, in the circumstances of Gourley's case being repeated, that if that were taken into account the result would be the same. If the Solicitor-General has anything to add to that I am sure that he will add it, but if that is the position what is all this about?

The Solicitor-General: Perhaps I should say that that is precisely what I intended to say and what I hope I did say.

Mr. Mitchison: I am very glad to find that we are in agreement.

Mr. Millan: Before we go any further, I wonder whether we could be absolutely clear about what this Clause does. The hon. Member for Wolverhampton, South-West (Mr. Powell) has assumed that this Clause will cover the sort of payment made in the Gourley case, but as far as I remember that was a payment not of an employer to an employee, but a payment by a third party. I was assuming, and, of course, I may be completely wrong, that the natural assumption was that this Clause had to be read in connection with Clause 35. In fact, the rubric to Clause 36 refers to exemptions and reliefs in respect of tax under Section 35.
When one reads Clause 35, the only construction which one can suggest on subsection (2) of that Clause is that this payment arises directly out of the termination of the employment, which would normally be a payment by the employer, although in the circumstances


provided for in subsection (1) it may be by any other person. The whole construction seems to be a payment by the employer in circumstances in which the termination of the employment has had something to do with the employer, and I therefore wonder if the Gourlay case comes under Clause 36 at all.

Sir Hugh Lucas-Tooth: I do not think that it is the effect of the Gourley case on this Clause with which we are now concerned, but that it is rather the other way round. In the Gourley case, counsel on both sides agreed that there would be no tax leviable on the payment, whether it was the larger one of £37,000 or the smaller one of £7,000, and that view was accepted by the court. Therefore, there is no impact on this Clause of that case.
What this Clause does is to make it clear beyond any doubt that if a payment is made out of court, that payment will be made free to tax, but as the Clause does not alter the Gourley ruling, it is equally clear that under the law as it will stand after this Clause becomes law, the court will still be bound by the decision of the House of Lords to award the smaller amount. Therefore, the position is that in the case that is settled out of court, the larger amount should be payable than in a case decided by the courts, because the court will be bound to take account of the existing law. That may produce entirely unfair results because, clearly, the employer will always be able to say, as my hon. Friend pointed out, "If you accept this from me now out of court, I can pay you a larger sum than you will be able to get, because the court will be bound to take account of the fact that Income Tax will be deductable under the law as it stands."
For that reason, I would press my hon. and learned Friend to consider this matter urgently. I do not think that the position is altered as a result of the change in the law so far as the law itself is concerned. What is clear is that the practical position will be altered because those who are concerned with making these arrangements will be able to point to this specific provision and to say, "There is no doubt about this. You should take what I am giving to you and be thankful for it, because you may get less otherwise".

Mr. Diamond: The Committee will be relieved to hear that I do not propose to refer to the case even by the name of the gentleman by which it is known, because I think that there has been enough diversity of opinion about it already. I want to ask for the views of the Government in regard to subsection (1, a).
I fear that the exemption granted is too great. This may seem odd, because on the face of it it would seem reasonable that a payment made to the estate of a dead person should not be taxable, but I think that it goes a little deeper than that.
I take the ordinary case in which a director of a company which he controls wants to provide his estate with a capital sum which would be provided out of the taxed profits of the company, yet neither he himself nor his estate would be required to pay Income Tax or Surtax. The company then proceeds to appoint him a director for life, and let us assume that he works adequately and satisfactorily up to the age of 75. At the age of 78—and I hope that I am making no reference to anybody present about that age—he begins to feel a little uncertain. His mind works a little less well than usual, and he begins to show signs, or his colleagues conveniently so regard them, of suffering from a disability, and not being able to carry out his job.
They award him a very substantial pension, which becomes a free-of-tax charge on the company's accounts, and therefore the revenue is deprived of tax in respect of that large sum. The director receives this large compensation, which may be £20,000, £30,000 or even £40,000, free of tax, because Clause 36 (1, a) says that tax shall not be charged on payments made on account of the disability of the holder of the office. Or, if the person concerned is appointed a director for life, at some time or other he will die and he will die in office. He is appointed for life, and unless he retires or is dismissed by virtue of his disability, advancing age and lack of mental capacity to do the job, he will die in office and his estate will receive this very large sum of money.
Is it right and is it what Parliament intended that there should be large sums of money awarded which would be charged to the accounts of the paying


company, on which the Revenue will lose the tax and on which the recipient will bear neither Income Tax nor Surtax? Would it not, therefore, be reasonable to do what one surely has in mind in these circumstances and have regard to the death of a person in employment? Let us assume that he retires at a reasonable age, say, 65. If he dies in employment up to the age of 65, presumably, it is a misfortune, but why carry on until, inevitably, either he dies or suffers a disability and inevitably gets a tax-free income out of the company?

8.0 p.m.

The Solicitor-General: I will deal, first, with the point made by the hon. Member for Gloucester (Mr. Diamond). I think that he was correct in his reading of Clause 36 (1, a). Of course, in cases of death after retirement the position would not be affected, but where death occurred during the holding of an office, or a payment was made in connection with the termination of the holding of an office or employment by death, the position would be affected.
Obviously, the case with which the whole Committee would wish to deal by way of exemption is that, say, of a man in middle life who, suddenly, is struck down, it may be with a coronary thrombosis. Clearly, it is right that such a man should be able to cover himself by an appropriate scheme, or by a voluntary payment. I do not see how we can draw the line other than by dealing with it in the way we have. The case of the aged director is met by provisions in the Companies Act and I think that we must leave it at that. I cannot see any reasonable way of relating the amount of compensation to the degree of injury and fitting that into a sliding scale of age.
I should say that it is right to proceed in the way we do in this subsection. The point has occurred to us. Obviously, it is open to abuse in the way the hon. Gentleman described, but I think that the cases would be so rare and the complications of legislating for them would be so great that they should be disregarded. However, I will look into that aspect again.
I do not think that there is much I can add about the case of Gourley except to say, in answer to the hon. Member for Glasgow. Craigton (Mr. Millan), that I

am sure that my hon. Friend is right when he says it is relevant to this Clause; and the reason why it is relevant is that Gourley's case did not turn on the fact that the injury was caused by someone other than his employer. If, for example, the injury had been caused by the employer to the employee in the course of his employment by reason of the negligence of the employer, the decision so far as I can see would have been the same.
Therefore, the problem is raised squarely in the way that my hon. Friend mentioned. He and my hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth) may well be right, but I say that another view is possible. I think that we ought to see how the courts react, but I assure the Committee that this matter will be kept in mind.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Orders of the Day — Fourth Schedule.—(RELIEFS IN RESPECT OF TAX UNDER SECTION THIRTY-FIVE.)

Mr. Powell: I beg to move, in page 68, line 14, after "tax", to insert "(including surtax, if any)".
This paragraph of the Schedule provides that relief shall be allowed in respect of Income Tax. In many contexts, if not in most, Income Tax includes Surtax, which is indeed Income Tax charged at a higher rate. Here the context is such as at least to create a doubt that Surtax is included. Here the reference is not to Income Tax simply but to Income Tax chargeable under Clause 35. If we look back to Clause 35, we find that the reference is to Income Tax charged under Schedule E. That does not include Surtax and, therefore, it might be argued that this Schedule does not give relief in respect of Surtax. I apprehend that cannot be the intention, and for that reason we have put down this Amendment.

Sir E. Boyle: My hon. Friend is quite correct about the intention of the Bill, and I think he is correct in saying that, in this instance, when one has regard to the way in which the Schedule is drafted there may be a doubt in this case whether Income Tax includes Surtax.
There is a difficulty about the actual wording of the Amendment. Usually


Parliamentary draftsmen have a certain uneasiness about putting an Amendment in exactly this form because it could well throw doubt in some other parts of the Bill whether Income Tax includes Surtax or not. I therefore ask my hon. Friend to let us look again at the drafting of any Amendment which is required. We have his point and certainly on Report stage will make plain what is the intention of the Bill.

Mr. Powell: I appreciate that my hon. Friend has taken the point and beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Relief by reduction of sums chargeable


5
3. In computing the charge to tax in respect of a payment chargeable to tax under section thirty-five of this Act, not being a payment of compensation for loss of office, there shall be deducted from the payment a sum equal to the amount (if any) by which the standard capital superannuation benefit for the office or employment in respect of which the payment is made exceeds five thousand pounds.



4. In this Schedule "the standard capital superannuation benefit" in relation to an office or employment, means a sum arrived at as follows, that is to say—


10
(a) there shall be ascertained the average for one year of the holder's emoluments of the office or employment for the last three years of his service before the relevant date (or for the whole period of his service if less than three years);


(b) one-twentieth of the amount ascertained at (a) shall be multiplied by the whole number of complete years of the service of the holder in the office or employment; and


15
(c) there shall be deducted from the product at (b) an amount equal to the value at the relevant date of any lump sum (not chargeable to tax) receivable by the holder in respect of the office or employment in pursuance of any such Scheme or fund as is referred to in paragraph (d) of subsection (1) of section thirty-six of this Act:


20
Provided that no account shall be taken for the purpose of this paragraph of the service of any person as an officer or employee of a body corporate at any time while he was a controlling director (as defined by section three hundred and ninety of the Act of 1952) of that body.


25
5. Where tax is chargeable under section thirty-five of this Act in respect of two or more payments to which paragraph 3 of this Schedule applies, being payments made to or in respect of the same person in respect of the same office or employment or in respect of different offices or employments held under the same employer or under associated employers, then —


30
(a) the said paragraph 3 shall apply as if those payments were a single payment of an amount equal to their aggregate amount and, where they are made in respect of different offices or employments, as if the standard capital superannuation benefit were an amount equal to the sum of the standard capital superannuation benefits for those offices or employments;


35
(b) where the payments are treated as income of different years of assessment, the relief to be granted under that paragraph in respect of a payment chargeable for any year of assessment shall be the amount by which the relief computed in accordance with the foregoing provision in respect of that payment and any payments chargeable for previous years of assessment exceeds the relief in respect of the last-mentioned payments;


40
and where the standard capital superannuation benefit for an office or employment in respect of which two or more of the payments are made is not the same in relation to each of those payments, it shall be treated for the purposes of this paragraph as equal to the higher or highest of those benefits.


45
6. In computing the charge to tax in respect of a payment chargeable to tax under section thirty-five of this Act, being a payment made in respect of an office or employment in which the service of the holder includes foreign service and not being a payment of compensation for loss of office, there shall be deducted from the payment (in addition to any deduction allowed under the foregoing provisions of this Schedule) a sum which bears to the amount which would be chargeable to tax apart from this paragraph the same proportion as the length of the foreign service bears to the length of the service before the relevant date; and in this paragraph "foreign service", in relation to an office


50

Sir E. Boyle: I beg to move, in page 68, line 15, to leave out from "made" to end of line 17 and insert:
in accordance with subsection (4) of section thirty-six of this Act".
This Amendment is only a drafting Amendment to the first paragraph of the Schedule.

Amendment agreed to.

Sir E. Boyle: I beg to move, in page 68, line 25, to leave out from beginning to end of line 41 on page 71 and to insert:

or employment, means service such that tax was not chargeable in respect of the emoluments of the office or employment—


55
(a) in the case of the year 1956–57 or any subsequent year, under Case I of Schedule E; or


(b) in the case of any preceding year of assessment, under Schedule E.

120
12. In this Schedule "payment of compensation for loss of office" means a payment made in pursuance of an order of a court in proceedings for wrongful dismissal or otherwise for breach of a contract of employment, or by way of settlement of such proceedings, or made by way of compensation for the extinguishment of any right the infringement of which would be actionable in such proceedings; and any question whether, and to what extent, a payment is or is not a payment of compensation for loss of office shall be determined according to all the circumstances and not (or not exclusively) by reference to the terms on which it is expressed to be made.


125
13. Any reference in this Schedule to the emoluments of an office or employment is a reference to those emoluments exclusive of any payment chargeable to tax under section thirty-five of this Act; and in calculating for any purpose of this Schedule the amount of such emoluments —


130
(a) there shall be included any balancing charge to which the holder of the office or employment is liable under section two hundred and ninety-two of the Act of 1952;


(b) there shall be deducted any allowances under Chapter II of Part X of that Act, and any allowances for expenses under paragraph 7 of the Ninth Schedule to that Act, to which he is entitled;


135
and any such charges or allowances as aforesaid for a year of assessment shall, for the purpose of ascertaining the amount of the emoluments for any year of service, be treated as accruing from day to day, and shall be apportioned in respect of time accordingly.

I think that my present function had better be confined to moving this Amendment briefly and then we can consider one or two of the Amendments to it and after that take the usual examination paper from the hon. Members opposite.

This Amendment substitutes new paragraphs 3 to 13 for the existing paragraphs. The reason is that there are a number of defects in the paragraphs of the Fourth Schedule as originally drafted. In case anyone wishes to ask the question, may I say that I have read the original Schedule carefully and the new words to be substituted. Some of these drafting Amendments are important and others are comparatively unimportant. The defects do not involve any important matter of principle. They are concerned mainly with the complications arising from the interaction of various reliefs in cases where two or more payments are made to the same employee by the same employer or persons to be treated for the purposes of the provision as the same employer.

The Amendment takes the form of a revised version of paragraphs 3 to 13 in order to avoid a large number of separate Amendments to the Schedule which would have been difficult to follow, and my right hon. Friend the Chancellor thought it would be convenient that we should have a completely new version. In addition to the Amendments which are mainly drafting Amendments to cure defects and obscurities there has been some change in the order of paragraphs. Those which deal with the reliefs operating to reduce the amount

chargeable in voluntary payment cases have been brought forward because it is more logical to deal with that before the top slicing reliefs.

Mr. Millan: Mr. Millan rose—

The Temporary Chairman: The Question is—

Mr. Mitchison: On a point of order, Mr. Arbuthnot. My hon. Friend was on his feet.

Mr. Millan: This Amendment includes the substance of the Fourth Schedule and it seems to me that all the discussion on the Schedule that we need could come under this Amendment, which takes more than three-quarters of what was the Schedule. There are a number of points of considerable interest in the Schedule and, therefore, in the Amendment. This Amendment considerably alters the picture given under Clauses 35 and 36.
This is, perhaps, the most appropriate point at which to repeat the complaint which has been made at various times about the difficulty of following these extremely complex provisions. It would be for the convenience of everyone, and not least for the Government Front Bench, if we had a memorandum, or some sort of explanation, laying down in simple terms what these provisions mean. They are extremely difficult to follow. There are several parts of this Amendment which are almost completely unintelligible. It would save a considerable amount of time and a considerable number of questions in Committee if we had some idea of what


the Government were trying to do. The problem is that it is extremely difficult to find what the Government are trying to do under the terms of the Amendment.
There are several points of detail I want to make. It seems that the provisions of the Fourth Schedule as a whole make a considerable difference to the provisions of Clauses 35 and 36. When we consider the provisions of the Schedule, the original intention, or basic intention, to catch the lump sum payment—to catch the "golden handshake —becomes considerably modified in actual practice. I am not necessarily objecting to a great deal of the modification which takes place because, obviously, if we bring considerable sums of money into taxation in one year's assessment we could get what amounted to rather unfair results. Therefore, we need some modifications, but the modifications seem to err on the generous side.
First, there is the concept of the standard superannuation capital benefit—a notional figure to be calculated on the years of service of the employee concerned. In a previous debate today, the Chancellor mentioned that for the purpose of approved superannuation schemes it was possible to give a lump sum payment on retiral equivalent to three-eightieths of the annual salary of the person retiring for each year of that person's service. In this Amendment quite material concessions have been made and in the cases we are dealing with I notice that the standard capital superannuation benefit under this Schedule is arrived at, not on the basis of three-eightieths, but of one-twentieth of the actual salary, which is four-eightieths. If three-eightieths is the relevant figure for approved superannuation schemes, I cannot see why it should not also be the relevant figure in the Fourth Schedule.
This standard capital superannuation benefit might work out at appreciably higher than £5,000. This is a point I made earlier when discussing the justice of the £5,000 figure. The Chancellor of the Exchequer did not answer one of the main points, which was that that is a minimum figure, which applies where the standard capital superannuation benefit is less than that. It is not a maximum figure, but in many cases it can be considerably exceeded. I think that the

method by which the standard benefit figure is calculated is unduly generous when we consider that one-twentieth is used rather than three-eightieths in the case of approved superannuation schemes. It is true that under paragraph 4 it is said, in line 15 and onwards, that any lump sum which is payable under an approved superannuation scheme—

The Temporary Chairman: Order. I am trying to follow what the hon. Member is saying, but, as I see the position, he came in when I was about to put the Question "That the words proposed to be left out stand part of the Clause". The second Question "That the proposed words be there added", had not been proposed. Therefore, these remarks of the hon. Member can come after that Question has been proposed. I do not think he is on the right Question at present.

Mr. Mitchison: On a point of order, Mr. Arbuthnot.Is not this what happened? The Financial Secretary moved an Amendment and you rose to put the Question. I think you failed to notice that my hon. Friend the Member for Glasgow, Craigton (Mr. Milian) had risen. Therefore, is he not speaking on the Amendment proposed by the Financial Secretary, and not on the Question, which was only half put by inadvertence?

8.15 p.m.

Sir E. Boyle: Further to that point. I am trying to be helpful. Is not the most convenient procedure that the Question, "That the words proposed to be left out stand part of the Clause" should be defeated and then we should have the Amendments to the new Schedule, if I may so call it, or the new paragraphs? After that, we should have the Question, "That the proposed words be there added". Then the points which the hon. Member for Glasgow, Craigton (Mr. Millan), or anyone else, wishes to put could be taken on approval of the new paragraphs as a whole. I cannot help feeling that that is the most convenient procedure. It is rather analogous to that when a new Clause is introduced and one moves, "That the Clause be read a Second time" and then the Amendments are considered afterwards.

Mr. Mitchison: I am sure that the Financial Secretary is genuinely trying to help, but what was moved was,
in page 68, line 25, to leave out from the beginning to the end of line 41 on page 71 and to insert—
the words which follow on the Notice Paper. The normal procedure on an Amendment of that kind is to speak to the Amendment and not to parts of it, because the parts will not have been put at the time the debate takes place. I hope that it will remain open to us to compare what has been left out with what has been put in. There might be difficulty in doing that if we were speaking to the Question "That the words proposed to be left out stand part of the Clause", or the Question "That the proposed words be there added."
Let us hope that we shall not get into the position which happened on a famous Friday, when a number of words were left out and, owing to a change in the composition of the House, nothing was put in their place. It is better to take what substantially is one Amendment in its complete form.

The Temporary Chairman: I thought that it might be for the convenience of the Committee to take it the other way.

Mr. Millan: I do not pretend to follow these exchanges, but I take it that the result of them is that I can continue the point that I was making. I wanted to raise a point about the wording from line 15 onwards in the Amendment where we are deducting from the standard superannuation capital benefit as calculated any lump sum payable under an approved superannuation scheme. There is a slight difficulty in the wording, and perhaps the Financial Secretary will look at this point. There may be an approved superannuation scheme where there is not a lump sum payable until retirement at a particular age, say 65, but we might be dealing with a compensation payment which has taken place simply through a change in the emoluments of the employment and the change might take place only a year, or perhaps even less, before the normal retiring age of 65.
There is the question of whether or not any lump sum payment under an approved superannuation scheme should be deducted in a case like that in calculating the standard benefit. It seems that

one ought to anticipate the fact that a lump sum will be paid, perhaps in a short period of time, and make a deduction. I think that, in effect, that is what the paragraph says because it speaks of the "value at the relevant date", which is the date of the change in circumstances for which the compensation is being made. If that is anticipating, and presumably discounting, as it were, the lump sum payment, we are absolutely right, but I should like the Financial Secretary to confirm that that is a correct reading of the paragraph.
There is another point about the deduction of the lump sum payment in an approved superannuation scheme which I think is absolutely vital. One also ought to take account of the fact that, apart from any lump sum payment, there may be a right to an annual or periodical payment. If it is an approved superannuation scheme there will definitely be a right to an annual or periodical payment on retirement. I wonder whether we should not deduct from the standard benefit, not only the lump sum, but the capitalised value of the annual payment which has been or will be given to the individual concerned.
In this whole question of compensation we are by implication dealing with people who are getting payments in lieu of some standard or regular payment which would accrue to them, or something out of the ordinary course of their employment. In those circumstances we are entitled to deduct not just a lump sum but also any capital value of an expectation of pension which will arise to them, and thus put them on a proper footing with other people who retire at normal retiring age. I hope that the Financial Secretary will also look into that point.
Paragraph 7 deals with relief by reduction of tax. There is one small drafting point which I should like to see looked into. In sub-paragraph (a), there is a reference to
the amount of tax which would be chargeable apart from this paragraph …
We ought to be perfectly clear that that is the amount of tax after relief under paragraph 3 of the Schedule. It may or may not be that. In line 68, sub-para-graph (c, i) we read
the appropriate fraction only of the payment",


and in brackets there is a note
after deducting any relief applicable thereto under the foregoing provisions of this Schedule".
I think that something like that ought also to apply to line 61, in sub-para-graph (a) in dealing with the question of tax.
That is not wholly a technical matter because we are dealing with relief which may be applied for, as I understand it, up to six years after the end of the year under which the original payment has been taxed, and we are not necessarily making all the calculations of tax and relief at the same time. There may have been tax payments made and relief claimed only subsequently under the terms of the Schedule.
That is a technical point and it might be useful to raise one other technical point at the same time. I direct attention to lines 95 to 105 in paragraph 9. I have not put this down in money terms and worked out the arithmetic, but those lines are almost completely unintelligible, and I wonder whether the Financial Secretary will tell us exactly what they mean. I think I know what they are trying to do but I am not convinced that they are doing it.
These are technical points, but there is another point which is of considerable substance. In working out the tax liability, which is to be assessed in one year but based on the assumption that the payment has been received over a period of six or more years, it is provided in line 72, in paragraph (c, ii), that liability shall be worked out
disregarding, in each case, any other emoluments of the office or employment.
This is based on the assumption that the person being compensated for loss of office or termination of employment will not get alternative employment at all. That does not seem to me to be necessarily a correct assumption. Certainly it is not a correct assumption in all cases with which we shall deal under Clauses 35 and 36.
I recognise that there is considerable difficulty here in finding a form of words which would deal justly with the different circumstances which may arise. If a man's employment is terminated late in life, it may be that the disregard here is perfectly justifiable. But if compensation payment is being made to a com-

paratively young man, it is more reasonable to assume that he will get some sort of alternative employment which will probably approach in remuneration what he has been receiving from the employment under which the compensation payment is being made. I wonder whether the disregarding of the
emoluments of the office or employment
could be restricted to those cases in which the person is retiring from work altogether and not applied when he is likely to take on, and perhaps has, taken on other employment.
There are thus three main points which I should like the Financial Secretary to consider in principle. They are points of substance. The first is that of disregarding the
emoluments of the office or employment
from the point of view of calculating the tax liability. The second is the question whether the one-twentieth in calculating the relief for the standard capital superannuation benefit is correct. The third is whether we should not from the standard capital superannuation benefit deduct not only a lump sum payment under an approved superannuation scheme but also the capitalised value of any periodical payments which may be coming to the holder of the office or employment under that scheme.

Sir H. d'Avigdor-Goldsmid: I do not want to trouble the Committee unduly, but when the Financial Secretary introduced the Amendment he said that whereas it differed from the previous Schedule in shape and form it did not differ very materially in sense. There is one aspect to which I want to draw attention, and that is the treatment of relief in respect of overseas service, which is covered by paragraph 10 of the old draft and paragraph 6 of the new draft.
If I am fortunate enough to catch you eye later, Mr. Arbuthnot, I propose to raise this subject again, but while we have a chance of comparing the original with the revised draft, I want to establish the point that there is a considerable difference of treatment in respect of this relief. In the old draft the original sum was first reduced by a proportionate sum in respect of the years of overseas service. After that reduction it was further reduced by the standard capital superannuation benefit.
I suspect that under the original draft most payments coming under the Clause with a substantial element of overseas service in them would have escaped taxation altogether, but in the new draft the position has been reversed. The sum is first reduced by the standard capital superannuation benefit and then the balance remaining is further reduced by the proportion in respect of the amount of overseas service to which it refers. Therefore, in the second case there is bound to be some amount caught by taxation. I hope to have the opportunity to argue later whether the provision is adequate. My object in rising at the moment is to draw the Committee's attention to this very major change in sense between the first draft and the second.

8.30 p.m.

Mr. Mitchison: Having consulted my right hon. and hon. Friends, I wish to protest very strongly about the way in which this Schedule, because it is virtually a Schedule, has been introduced by Amendment at a very late stage. I think that it was introduced just before the weekend. No doubt the Financial Secretary will correct me if I am wrong. Moreover, it has been introduced with no explanation, written or printed. When the Financial Secretary rose to present it, he made a very summary statement indeed of the effect of what he proposed and the difference involved in substituting this Schedule for the Schedule which appears in the Bill.
It is too much to expect the Committee to accept this kind of change and a Schedule of this complication without some explanation from the Government of what it is all about. It is hard enough for my hon. Friend the Member for Glasgow, Craigton (Mr. Millan). It is even worse for the rest of us. It is extremely difficult. I shall point out one or two things in the Schedule by way of illustration of my protest, and for no other reason. I earnestly hope that before we leave the Schedule as it is proposed to be amended, we shall have from a member of the Government a clear explanation of what the whole of it means.
I will now direct attention to something about which I shall say more later. There is a proviso at line 95 which reads:
Provided that where the appropriate fraction and appropriate multiple are not the same

for each of the payments, the calculations of relief under the said paragraph 7 shall be made separately in relation to each payment or payments having a different appropriate fraction and multiple, and in any such calculation—
(a) any payment for which the appropriate multiple is lower.
Lower than what? I do not know. The proviso continues:
shall be left out of account for all the purposes of the said paragraph 7 and
(b) in ascertaining the difference at (c) of that paragraph it shall be assumed that the appropriate fraction only of any payment for which the appropriate multiple is higher had been made;
and the relief to be allowed shall be the sum of the reliefs so calculated in respect of the payments respectively.
I defy any hon. Member reading that for the first time to make out what it is all about, unless he sits down with a wet towel round his head for half an hour. The miserable taxpayer has to deduce from this form of language what his rights are. We are all supposed to know the law, but no one is supposed to be able to interpret this kind of choctaw without a previous explanation from the Government of what it is all about. It is just too bad for it to he introduced at this stage in this way, if it had been in the Bill, we might have had a better understanding of it. It is brought in at very short notice by way of an Amendment and we have to wade about and discover what it is all about.
The words I have quoted raise some very curious questions. It is a proviso. It all relates to paragraph 9, which deals with the circumstances in which successive payments shall be treated as a single payment. The appropriate fraction and the appropriate multiple are to be found in the previous paragraph. They are defined as follows:

"(a) where the payment is not a payment of compensation for loss of office, one-sixth and six;
(b) where the payment is a payment of compensation for loss of office, one divided by the relevant number of years of unexpired service, and that number of years".

We shall, therefore, get both a fraction and a multiple. We are told in the proviso:
The calculations of relief under the said paragraph 7 shall he made separately in relation to each payment or payments having a different appropriate fraction and appropriate multiple …


I understand that so far. I do not think that there was a word of this in the original draft of the Schedule. It continues:
and in any such calculation—
(a) any payment for which the appropriate multiple is lower shall be left out of account for all the purposes of the said paragraph 7
I should like the Financial Secretary to explain why that is done.
Then we come to this:
… in ascertaining the difference at (c) of that paragraph"—
and (c) is a passage in paragraph 7 referring to the difference between the respective amounts of tax that would be so chargeable on certain assumptions:
it shall be assumed that the appropriate fraction only of any payment for which the appropriate multiple is higher had been made"…
I do not know how one make a fraction. I suppose that what it means is that all that had been paid was the appropriate fraction only. What is the appropriate fraction in these circumstances? Perhaps the hon. Gentleman would be good enough to explain that, because I find it far from clear.
Lastly, I notice that there are certain cases in which one neglects the payment altogether—that is where the appropriate multiple is lower. What I should like to know is, lower than what? And there are certain other cases in which one makes assumptions about payments. The Schedule continues:
… and the relief to be allowed shall be the sum of the reliefs so calculated in respect of the payments respectively".
I think that I understand the payments, but what I do not understand is the relief at that point. I suppose that it is the different calculations of relief made separately in relation to each payment or payments, but what bothers me is this reference to fractions and multiples. Suppose the result is unity, is that an appropriate fraction or not? In the same way, if the appropriate multiple is unity, is that to be taken account of, and with what result? In short, I ask the hon. Gentleman to explain in tolerably clear English what this excessively complicated proviso is about.
I said that I did not think that there was anything of the sort in the previous provision—

Mr. Powell: Paragraph 5.

Mr. Mitchison: Yes, I see—but it is not, I think, as long.

Sir E. Boyle: The word "claimant" does not appear, otherwise paragraph 9, which I was trying to explain, is identical with the old paragraph 5.

Mr. Mitchison: If the hon. Gentleman will explain it, that is all to the good. He will realise that this is no mere academic exercise because the treatment to be given to cases in which a number of these payments are to be regarded as one for the purpose of the Clause is rather important.
I had one or two other points, but I would again ask the Financial Secretary if, instead of putting it on us to go through this point by point and paragraph by paragraph, he would explain the purport of the whole of the Amendment now being introduced, and not leave us to pick our way through what is an excessively complicated provision. I am sure that he will do so—I see that he nods, so, for the moment, let us hear what he has to say.

Sir E. Boyle: First, I must tell the hon and learned Member for Kettering (Mr. Mitchison) that I am extremely sorry that this Amendment was only tabled, I think, last Friday, but I must say that I think that a new version of the Fourth Schedule is probably more convenient to the Committee than a whole lot of detailed Amendments would have been. In substance, the changes are very small. As I have said, there has been a rearrangement, but very little change in substance indeed.
The only reason I did not say more earlier was that I thought that it would be more convenient—as one does on the Question "That the Clause stand part of the Bill"—to hear points raised in all parts of the Committee and then to try to answer as many of them as possible—

Mr. Mitchison: I am most grateful to the hon. Gentleman for that attitude, but he would have saved us all quite a deal of trouble had he followed the suggestion of my hon. Friend the Member for Glasgow, Craigton (Mr. Milian) and, if necessary, had got someone to ask him a question as to whether he would give an explanation, and had then put copies


in the Library, or some other convenient place. Had he been able to convey to the Committee that there was really not much difference between the two versions, that in itself would have helped us.

Sir E. Boyle: I can assure the hon. and learned Gentleman that we shall consider that point for another year. It is a difficulty which often arises.
In general, if I may take first the hon. and learned Gentleman's question about what the Schedule does, there are three points. First, there is what has been called top slicing relief, which is paragraphs 3 to 6. I think it is accepted by the Committee that it would be too harsh to tax the whole payment, which may well be for several years' service, at the rates of Income Tax and Surtax which would apply if it were treated as the income of a single year. The taxpayer may, therefore, claim relief by top slicing. That is the first supplementary point in the Schedule to the exemptions and reliefs given by Clause 36.
Secondly, in paragraphs 7 to 9—I will deal with the obscure passage in paragraph 9 to which the hon. and learned Gentleman referred—there are provisions dealing with relief for standard capital superannuation benefit, and this applies to payments other than payments of compensation.
Thirdly, paragraph 10 deals with relief in respect of past service overseas where the payment is not a payment of compensation. In that connection, I shall in a few minutes answer the point raised by my hon. Friend the Member for Walsall, South (Sir H. d'AvigdorGoldsmid)

Mr. Millan: The paragraphs to which the hon. Gentleman is referring are not the paragraphs in the Amendment but in the original Schedule. I take it that he will explain the paragraphs in the Amendment.

Sir E. Boyle: I am sorry. At any rate, those are the three topics dealt with in the Schedule. As the hon. Gentleman quite rightly points out, the order has been altered in the new version.

Mr. Mitchison: I am sorry to interrupt again, but we are anxious to find out what this is all about. There are also three paragraphs called "Supplemental". I am not sure that I am right,

but it seems to me that those introduce most of the actual changes.

Sir E. Boyle: I will deal with the supplemental paragraphs. Supplemental paragraph 12 defines what is meant by a payment of compensation for loss of office. Supplemental paragraph 13 defines what is meant by emoluments. Supplemental paragraph 14 defines references in the Schedule to the relevant date.

Mr. Diamond: Paragraph 14?

Mr. Willis: Not in the Amendment.

Sir E. Boyle: I think I was right about paragraphs 12 and 13. When we go beyond them, of course, the words in the original Schedule come in as well.
I come now to the point made by the hon. Member for Craigton on the subject of the fraction. He asked why we had a fraction of three-eightieths in the Clause and a fraction of one-twentieth in the Schedule. The answer is that three-eightieths is not an exact fraction. The law says merely that the proportion of the total benefit which can be paid in lump sum form by approved schemes must be similar to that applicable in statutory schemes. In some circumstances, the fraction might be slightly more than three-eightieths. Since it is necessary for the purposes of the Schedule to have a simple fraction, one-twentieth has been chosen as a sort of rounded-up figure. I agree with the hon. Gentleman; this is a rough way of doing it, but for these purposes we must, I think, use a rounded-up figure of some kind, and it is for that reason that one-twentieth has been chosen.

Mr. Diamond: A 33⅓ per cent.increase.

Sir E. Boyle: It is not as much as that, because three-eightieths, as I explained, is not an exact fraction, and in some circumstances the fraction might very well be bigger than three-eightieths.
The hon. Member for Craigton raised one point on paragraph 7 of the Amendment—I think I have it right this time—and, referring to the drafting, questioned whether the words
disregarding, in each case, any other emoluments of the office or employment
were too wide. I will look at that point before the next stage of the Bill.
8.45 p.m.
The hon. Member asked whether we should deduct the standard capital superannuation benefit from the capital value of any pension which is to be paid. The pension will be taxable, and therefore what has to be deducted is merely the tax-free lump sum due under an approved scheme. I think that the hon. Member's suggestion would work out too harshly.
My hon. Friend the Member for Walsall, South asked me whether we had made some change in paragraph 6. The Amendment to paragraph 6 was necessary because the original wording related the relief to the gross payment instead of to the payment as reduced by the £5,000 or the standard capital superannuation benefit. We shall be debating this perhaps on a forthcoming Amendment. I believe that this change will be to the advantage, and not to the disadvantage, of the taxpayer.
I now come to paragraph 9 of the Amendment which was regarded as obscure by the hon. Member for Glasgow, Craigton and the hon. and learned Member for Kettering. I will try to explain the paragraph as clearly as I can. We are here dealing with the problem of the top slicing of more than one payment for the same year, because it is possible that top slicing relief may have to be given for more than one payment regarded as income for the same year. This could happen if an employee were given payments first for what is technically called "stepping down"and then for retirement in the same Income Tax year, or if the director of several companies in the same group retires from them all at the same time and receives a payment from each member of the group. If all of the payments are to be top sliced by reference to the same period, there will not be any difficulty. The paragraph provides that they shall be treated as a single aggregate payment—for example, if all the payments are voluntary payments their total will be top sliced by reference to six years. The next paragraph makes it plain that that will be so even if they are from different jobs.
Difficulty arises—and here we come to lines 95 to 105—if there are two or more payments for one year to be top sliced by reference to different periods. It is here that we must have special

provision to quantify the precise relief that shall be given, and it is this special quantification contained in the proviso. Let me try to summarise the effect of this proviso. Certainly I can undertake to ensure between now and a later stage that the words give effect to the intention of this proviso.
The proviso is that relief is given separately for each payment or group of payments to be top sliced by reference to the same period starting with the payment for which the period is the longest. In this way the payment to be top sliced for the longest period is taxed at the rate which would apply to what is called the appropriate fraction of it if it were the top slice of an income which consisted of that appropriate fraction together with all the other income. [Laughter.] I well remember from my youth that the conjuror's explanation of how the trick was done was considerably more perplexing than the trick itself, but, try as I will, I cannot find words which will put the matter more simply than those which I have used.
To complete the picture, the payment to be top sliced for the next longest period is taxed at the rate which would apply to the appropriate fraction of it if it were the highest part of an income which consisted of that appropriate fraction together with the appropriate fraction of the payment top sliced for the longest period and all the other income. I am sure that I have not made the point with the same gusto that we heard from the hon. Member for Sowerby (Mr. Houghton).
I have been asked whether in this context the appropriate fraction could ever be unity. I do not believe that it could, but I will look into the point.
Those were some of the points asked by hon. Members on the Schedule. We are dealing here with three quite definite points. We are dealing with top slicing and the other points which I mentioned earlier. In a sense, the Schedule is partly supplemental to Clause 36. It partly dovetails with the Clause. I have listened with great interest to the examination that we have had from hon. Members and I hope that even if I have not come through it with an honours degree, the Committee may feel that I have come through with a pass degree and that we may now get on with the Amendments to the Schedule.

Mr. Mitchison: I suppose that my brain power is getting more limited as I grow older, but I find this uncommonly hard to follow. We may have to return to it on Report. I wonder whether the Financial Secretary could make available to hon. Members, before the Report stage, not only the golden words which he has uttered, but any other golden words that would help us to understand what all this was about. Then, if we have to come back to it on Report, having put wet towels round our heads and having read all that we should, we may be able to do so with a clearer understanding of what it is all about. I speak only for myself. Some of my hon. Friends understand much more about it than I do.

Sir E. Boyle: I will certainly consider, with my right hon. Friend, whether something may be possible.

Mr. Diamond: I trust that you do not have a headache, Sir William. If you do not, I suspect that you are the only person in the Committee who does not have one. Certainly, I have found everything extremely difficult. Notwithstanding that, I want to come back to one of the points raised by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), because the reply given by the Financial Secretary seemed to indicate quite clearly that he had not understood the point. It was an important one and should be pressed again so that the hon. Gentleman can look into it between now and Report.
I refer to paragraph 4 (c) and the method by which we arrive at the amount of the compensation which will be regarded as free of tax. I will put it in its simplest possible way of trying to achieve justice as between taxpayers. Let us assume that there are two people whose circumstances are identical, identical in their length of employment with the firm, their age, their salary and the annuity which is to come to them from the firm. The annuity is identical in all respects and provides that they can have either the whole amount as annual payments or, as is often the case, that they can get, say, one-quarter of it as a capital sum and the rest as reduced annual payments. This is within an approved scheme, approved in the normal sense of the term by the Treasury under the provisions of the Finance Act.
Case 1 gets compensation and starts the method of calculation by which one arrives at the amount of the compensation which is free of tax. In arriving at the amount of the compensation which is free of tax, the lump sum is deducted and, therefore, the amount of compensation which bears tax is greater by having been reduced by the lump sum.
The circumstances of Case 2 are identical in all respects. He gets the same compensation, but he says, "I shall not elect to take any part of my annuity as a lump sum and shall get it all by way of annuity". Therefore, in arriving at the amount of compensation which is free of tax, nothing is deducted in respect of a lump sum because no lump sum is paid.
The two cases are identical in all respects. One pays more tax than the other because in one case a lump sum is deducted. In the other case, a lump sum is not deducted. I cannot see how that can be right, but it follows from the provisions of the Schedule. I do not think that it is intended. We cannot put it right other than by taking into account not only the first factor of the lump sum, but the second or complementary factor of the annual payments under the superannuation scheme. Therefore, we have to ask not only what the man received as a lump sum, but what he would have received as a lump sum if he had taken the whole of his annual payments notionally as a lump sum, irrespective of whether he elected in one case to make the choice and have a lump sum and the rest in annual payments or did not do so.
To achieve justice as between two identical taxpayers we must consider not only the lump sum, but the whole of the annual payments. As my hon. Friend rightly said, the way to do that is to take a notional account of the amount of the whole of the annual payments. I hope that I have spoken with the same clarity that the Financial Secretary used in explaining the rest of the Schedule and made the point which my hon. Friend quite rightly put before the Committee.
I think that the answer, if I may be so discourteous as to say so, which the Financial Secretary gave indicated that he was on the wrong point. He said that the lump sum is free of tax, and we were only concerned with a payment which is


free of tax because we were only concerned with seeing that the amount of taxability is the same in both cases. But this calculation is not one of reality. It is the calculation of a notional sum and the reply of the Financial Secretary that one part happens to be tax free is utterly irrelevant, because we are really doing a sum of arithmetic. I ask the Financial Secretary to give consideration to this matter, because I think that it is a fundamental flaw in the calculation of the tax on that part of the compensation which is free of tax.

Sir E. Boyle: I will certainly undertake to look at that point again. There is a difference between us here as to whether we should only deduct the tax-free lump sum or whether, in addition, we should deduct from the standard capital superannuation benefit the notional capital value of any pension which is to be paid. I pointed out that the pension would be taxable. I understand the point and, while I adhere to my view, I will consider it.

Mr. Millan: I would like the Financial Secretary to look again at the point in line 72 about disregarding "emoluments of the office or employment". This is not a point of drafting, but a point of substance. There may be a difficulty in getting a suitable form of drafting but the new form of drafting would not have the same effect as this, if my point were met.

Question, That the words proposed to be left out stand part of the Schedule, put and negatived.

The Deputy-Chairman (Sir William Anstruther-Gray): I now propose, but do not put, the Question, "That the proposed words be there inserted", to allow the Amendment to Amendment 177 in the name of the hon. Member for Wolverhampton, South-West (Mr. Powell) to be moved.

Sir H. d'A vigdor-Goldsmid: I beg to move, as an Amendment to the proposed Amendment, in line 56, at the end to insert:
Provided that no tax shall be chargeable in any case if at least three-quarters of the service, or the last ten years thereof, or one-half the total and any ten of the last twenty years thereof, were foreign service.
We have spent a good deal of time this afternoon on what I would describe

as the ghostly battle of the categories: I should like to put a little flesh and blood into the discussion, and it is for that reason that I move this Amendment.
The Amendment deals with the rewards which those who have been employed in foreign service on behalf of employers in Britain may hope to receive on their return to these shores. It may not be out of place to put on record that at this moment these are people to whom we in this country owe an immense debt. They are people who have spent the best part of their lifetime, at any rate their business life, abroad, and they are facing now conditions which, when they entered the service, they would never have dreamt of.
9.0 p.m.
I had the pleasure of visiting India last winter, and I must say I was tremendously impressed by two things, the very high opinion which the British commercial community have earned for themselves in India, and the difficulties with which they are faced in the daily conduct of their business. When these people as young men went out to India they did not expect to find that at the end of their days they would be paying in India a rate of taxation substantially higher than that to which they would have been liable if they had been working in Britain. They also probably felt when going to India twenty-five or thirty or forty years ago that they were going as the governing race and would enjoy privileges and pleasures which they would not normally have been able to expect in Britain.
These conditions are changed; they are changed completely. I do not think that we regret it, but I think that we must bear in mind the effect that that has had on these people who are serving their time there and who, under an entirely different Government in India, have made the commercial position of Britain in that country better and have a better standing today than any time in the last twenty years. They have very great adaptability, but they are in very difficult circumstances and at the same time are not in a position to benefit themselves from the services which they are rendering.
I make that point because the British community is subject to all the taxes of the Indian taxation system which has in


it many elements which would attract the attention of the hon. Member for Gloucester (Mr. Diamond) who, I am sorry to say, is not with us at this moment, because I think here we have an example of how little can be left in the taxpayer's pocket while at the same time producing no substantial revenue for the exchequer.
There is another element for people on overseas service, and that is the climate with which they have to contend, and which very often leads to premature retirement. There is a third element, which is that people retiring from overseas services now and in the near future wil be faced in their middle years with the expense of establishing a home in England and, as we all know, anything which one buys today is a great deal more expensive than it would have been if one had bought it twenty or thirty or forty years ago, or if one had inherited it at that time.
For all these reasons, I think that these people deserve special attention from us and have a special claim on our respect. My hon. Friend the Financial Secretary, in moving his Amendment, said that he did not think he would get an honours degree but a pass degree. If I were examining him in logic I would not be able to give him a pass degree.

Mr. William Ross: There is no logic in the Amendment.

Sir H. d'Avigdor-Goldsmid: I note the hon. Member's comments from a reclining position. He is not particularly interested in the problems of our Commonwealth and the problems of the people who, by their work in the Commonwealth, are doing something to support the exports from this country on which we depend.

Mr. H. Wilson: The hon. Gentleman must not misrepresent this side of the Committee. We are very interested in those working in the Commonwealth. What we are very worried about is the scandalous way the Government are treating them in not providing a decent continuing overseas service. If the hon. Gentleman does not know what I mean he might have a look at the Economist of the last week or two. I shall not pursue that because it is a little wide of the Schedule, but the hon. Gentleman must not assume that we are not con-

cerned with that just because we have some doubts about an Amendment.

Sir H. d'Avigdor-Goldsmid: I am grateful for that intervention. I have no doubt that those who read the debate will put what interpretation they think necessary upon it.
The meat of the Amendment is simple. In the original proposal those who were receiving an element of relief in respect of overseas service were likely to escape taxation on the sums which they received, for the reason I have already mentioned, that that sum was first subject to a deduction of a proportion in respect of overseas service and the net after deduction of that proportion was subject to deduction of standard capital superannuation benefit. My hon. Friend the Financial Secretary suggested, in moving his Amendment, that when the standard capital superannuation benefit is deducted first, which means that eventually there must be a sum to be caught for taxation, the taxpayer would be better off. It should be interesting to see him prove that, for I should have thought that a taxpayer would be butter off if no such sum were caught for taxation.
My Amendment is simple, and perhaps too simple to be popular with the Committee. I draw attention to its wording. Foreign service these days is hard work in uncomfortable surroundings and in the face of great difficulties of a kind absolutely unexpected when the people in question took their employment. If we are to maintain our export business it will be very largely through the efforts of people who, working abroad, still look forward to retirement in the home country. We should do less than justice to ourselves and to the sentiments which the right hon. Member for Huyton (Mr. H. Wilson) was good enough to utter if we did not consider very seriously whether by our action in this Committee we may be in danger of doing something which would materially reduce that prospect of comfort at home to which they are so well entitled to look forward.

Sir E. Boyle: I think that I can occupy the time of the Committee a good deal more shortly on this Amendment than I did on the previous Amendment. As my hon. Friend the Member for


Walsall, South (Sir H. d'AvigdorGoldsmid) explained, this Amendment to the proposed Government Amendment seeks to extend the relief which is given on a voluntary payment in cases where part of the employee's service has been outside the United Kingdom. This Amendment seeks to widen the relief, with total exemption in three types of cases—where three-quarters of the service was foreign, where the last ten years was foreign, and when one-half of the total was foreign and any ten of the last twenty years was foreign.
I understand the force of my hon. Friend's argument. There is a good deal to be said for his Amendment, and certainly in principle the Government are quite prepared to accept it. It is not quite satisfactory in its present form, but I assure my hon. Friend that if he agrees to withdraw it we will introduce one more suitably worded on Report. In so doing I am fully prepared to accept the point that service overseas is a matter of strong concern to all parts of the Committee. I hope therefore that in that situation my hon. Friend will withdraw the Amendment.

Sir H. d'Avigdor-Goldsmid: In view of that categoric assurance given by my hon. Friend the Financial Secretary, I beg to ask leave to withdraw the Amendment.

Amendment to the proposed Amendment, by leave, withdrawn.

The Deputy-Chairman: The next Amendment selected is in page 71, line 18, after "proceedings" to insert:
or of a claim in respect of which such proceedings could have been brought.

Mr. Powell: On a point of order. Might I confirm, Sir William, that it is not your intention to call the following Amendments to the Chancellor of the Exchequer's proposed Amendment—in line 88, to leave out "one year" and to insert:
a number of complete years.
and in line 89, to leave out "one year" and to insert:
that number of complete years.

The Deputy-Chairman: That is correct. They were not selected.

Mr.Denzil Freeth: I beg to move, as an Amendment to the proposed Amendment, in line 120, after "proceedings" to insert:
or of a claim in respect of which such proceedings could have been brought.
The Amendment to paragraph 12 of the proposed new Schedule, so to speak, is also an Amendment to the words which that new Schedule takes from paragraph 11 of the original Schedule. This deals with the various definitions of cases where loss of office occurs, and it mentions three I think out of four which I suggest to my hon. Friend the Financial Secretary should be covered.
The paragraph covers the case where loss of office occurs as a result of a court judgment. It covers the case where an action is settled before judgment but after proceedings have been initiated. Thirdly, it covers the case of a dismissal before any breach of contract has occurred. It does not cover the position where after the breach of contract has occurred, but before any proceedings are brought, the amount to be paid is settled between the former employee and employer without any writ being issued.
If I am right in my interpretation of this paragraph, I suggest to my hon. Friend, as indeed I wrote to him on 19th May just after I put down the Amendment, that it would be nonsense to produce a different result in the Bill according to whether or not a writ had in fact been issued, and one would not wish to cause people to go to the expense and delay of issuing a writ purely to remain within the wording of the new paragraph to which we are devoting a few minutes.

Sir E. Boyle: The Amendment raises a relatively narrow point. The only effect of the Amendment will be to include in the definition of the words
payment of compensation for loss of office
the case where a director or employee makes a claim for damages for wrongful dismissal for which there is no legal definition and the employer pays it to avoid trouble. It could be argued that such a payment should be dealt with as a voluntary payment rather than as compensation, but if the employee had secured the actual issue of the writ and then received a payment by way of settlement out of court the payment


would be within the definition of a compensation payment as the matter stands at present.
The Committee may feel, in those circumstances, that it seems rather pointless to try to exclude the case where no writ has been issued. It would, I think, improve the consistency of the definition if the Committee were to accept the Amendment. I was not certain until a few moments ago whether the Amendment was to be called. It raises a narrow point, but I think that, in all the circumstances, I can advise the Committee to accept it.

Mr. Diamond: I hope that my right hon. and hon. Friends will resist the Amendment very strongly, because this is opening up the whole thing; it is opening up loopholes. This provides for creating a compensation which is not based on any rights but on people getting together round the corner. The Financial Secretary is quite right to say that the difference between this and issuing a writ is small. All such a person will have to do is to tell a solicitor to issue a writ, to pay his fees, and he will then have gone through the machinery of the Clause. But that does not mean that the Amendment should be accepted There should be another Amendment to alter the machinery to make it more formidable than is now proposed.
I hope that my hon. Friends will support me in voting against acceptance of the Amendment, which would have most unsatisfactory results.

9.15 p.m.

Mr. Denzil Freeth: I hope that hon. Members opposite will reconsider their view, if it is as has been expressed by the hon. Member for Gloucester (Mr. Diamond). I am grateful to my hon. Friend the Financial Secretary for what he said. It need not necessarily be assumed that in order to reach a figure which may reasonably be regarded as compensation for loss of office it should be necessary to go to all the trouble of getting a writ and going to the trouble of going through the courts. If it is definitely established to the satisfaction of the Revenue that a loss of office has occurred and that it is a loss which justifies compensation, it should not be necessary for the employee to go to the trouble of getting a writ, or even taking proceedings as far as that.

Mr. Houghton: The Amendment would put the Inland Revenue in the position of having to decide whether a certain payment would be likely to have been made as a result of proceedings which could have been brought. That seems to us to be stretching the matter a little far and we will not assent to the Amendment.

Question put, That those words be there inserted in the proposed Amendment:—

The Committee divided: Ayes 166, Noes 88.

Division No. 97.]
AYES
[9.18 p.m.


Agnew, Sir Peter
Channon, H. P. G.
Fisher, Nigel


Aitken, W. T.
Chataway, Christopher
Fletcher-Cooke, Charles


Allason, James
Chichester-Clark, R.
Fraser, Ian (Plymouth, Sutton)


Alport, C. J. M.
Clark, William (Nottingham, S.)
Freeth, Denzil


Amory, Rt. Hn. D. Heathcoat (Tiv'tn)
Cleaver, Leonard
Gammans, Lady


Atkins, Humphrey
Collard, Richard
Gardner, Edward


Balniel, Lord
Cooke, Robert
Glyn, Sir Richard (Dorset, N.)


Barber, Anthony
Cooper-Key, Sir Neill
Goodhart, Philip


Barlow, Sir John
Cordeaux, Lt.-Col. J. K.
Goodhew, Victor


Barter, John
Corfield, F. V.
Grant, Rt. Hon. William (Woodside)


Beamish, Col. Tufton
Courtney, Cdr, Anthony
Grant-Ferris, Wg Cdr. R. (Nantwich)


Bell, Philip (Bolton, E.)
Critchley, Julian
Green, Alan


Bell, Ronald (S. Bucks.)
Crosthwaite-Eyre, Col. O. E.
Gresham Cooke, R.


Bennett, F. M. (Torquay)
Crowder, F. P.
Grimond, J.


Biggs-Davison, John
Cunningham, Knox
Grosvenor, Lt.-Col. R. G.


Bingham, R. M.
Curran, Charles
Hamilton, Michael (Wellingborough)


Bishop, F. P.
Currie, G. B. H.
Harris, Frederic (Croydon, N. W.)


Black, Sir Cyril
Dalkeith, Earl of
Harris, Reader (Heston)


Bourne-Arton, A.
d'Avigdor-Goldsmid, Sir Henry
Harrison, Col. J. H. (Eye)


Bowen, Roderic (Cardigan)
Deedes, W. P.
Harvey, John (walthamstow, E.)


Bon, Donald
Doughty, Charles
Heald, Rt. Hon. Sir Lionel


Boyle, Sir Edward
Drayson, G. B.
Hendry, Forbes


Braine, Bernard
Duncan, Sir James
Hiley, Joseph


Bromley-Davenport, Lt.-Col. W. H.
Duthie, Sir William
Hill, J. E. B. (S. Norfolk)


Burden, F. A.
Errington, Sir Erie
Holland, Philip


Butler, Rt. Hn. R. A. (Saffron Walden)
Farr, John
Hopkins, Alan


Carr, Compton (Barons Court)
Finlay, Graem
Hornby, R. P




Howard, Gerald (Cambridgeshire)
Matthews, Gordon (Meriden)
Sumner, Donald (Orpington)


Howard, Hon. G. R. (St. Ives)
Maydon, Lt.-Cmdr. S. L. C.
Temple, John M.


Hughes-Young, Michael
Mott-Radclyffe, Sir Charles
Thatcher, Mrs. Margaret


Hutchison, Michael Clark
Nabarro, Gerald
Thomas, Peter (Conway)


Iremonger, T. L.
Neave, Airey
Thorneycroft, Rt. Hon. Peter


Irvine, Bryant Godman (Rye)
Noble, Michael
Thornton-Kemsley, Sir Colin


James, David
Osborn, John (Hallam)
Tilney, John (Wavertree)


Johnson, Dr. Donald (Carlisle)
Pannell, Norman (Kirkdale)
Turner, Colin


Johnson, Eric (Blackley)
Pearson, Frank (Clitheroe)
Turton, Rt. Hon. R. H.


Kerans, Cdr. J. S.
Peel, John
van Straubenzee, W. R.


Kershaw, Anthony
Pickthorn, Sir Kenneth
Vaughan-Morgan, Sir John


Kimball, Marcus
Pitt, Miss Edith
Vickers, Miss Joan


Kitson, Timothy
Powell, J. Enoch
Wade, Donald


Lambton, Viscount
Prior-Palmer, Brig. Sir Otho
Wakefield, Edward (Derbyshire, W.)


Legh, Hon. Peter (Petersfield)
Proudfoot, Wilfred
Ward, Dame Irene (Tynemouth)


Lewis, Kenneth (Rutland)
Redmayne, Rt. Hon. Martin
Webster, David


Lilley, F. J. P.
Rees, Hugh
Wells, John (Maidstone)


Linstead, Sir Hugh
Ridley, Hon. Nicholas
Whitelaw, William


Litchfield, Capt. John
Ridsdale, Julian
Wilson, Geoffrey (Truro)


Loveys, Walter H.
Roots, William
Wise, A. R.


Lucas-Tooth, Sir Hugh
Russell, Ronald
Wolridge-Cordon, Patrick


McAdden, Stephen
Scott-Hopkins, James
Woodnutt, Mark


MacArthur, Ian
Shaw, M.
Woollam, John


McLaren, Martin
Simon, Sir Jocelyn
Worsley, Marcus


Maclean, Sir Fitzroy (Bute amp; N. Ayrs.)
Skeet, T. H. H.
Yates, William (The Wrekin)


Maddan, Martin
Smith, Dudley (Br'ntf'rd amp; Chiswick)



Manningham-Buller, Rt. Hn. Sir R.
Smithers, Peter
TELLERS FOR THE AYES:


Marshall, Douglas
Spearman, Sir Alexander
Mr. Brooman-While and


Marten, Neil
Speir, Rupert
Mr. Gibson-Watt.


Mathew, Robert (Honiton)
Studholme, Sir Henry





NOES


Ainsley, William
Hamilton, William (West Fife)
Plummer, Sir Leslie


Albu, Austen
Hannan, William
Proctor, W. T.


Allen, Scholefield (Crewe)
Hayman, F. H.
Redhead, E. C.


Bernn, Hn. A. Wedgwood (Brist'l, S. E.)
Holman, Percy
Reynolds, G. W.


Benson, Sir George
Houghton, Douglas
Rogers, G. H. R. (Kensington N.)


Blackburn, F.
Hughes, Emrys (S. Ayrshire)
Ross, William


Blyton, William
Hunter, A. E.
Silverman, Julius (Aston)


Brockway, A. Fenner
Hynd, H. (Accrington)
Skeffington, Arthur


Broughton, Dr. A. D. D.
Hynd, John (Attercliffe)
Smith, Ellis (Stoke, S.)


Butler, Herbert (Hackney, C.)
Irving, Sydney (Dartford)
Snow, Julian


Castle, Mrs. Barbara
Johnston, Douglas (Paisley)
Steele, Thomas


Corbet, Mrs. Freda
Jones, Dan (Burnley)
Stones, William


Crosland, Anthony
Key, Rt. Hon. C. W.
Summerskill, Dr. Rt. Hon. Edith


Grossman, R. H. S.
King, Dr. Horace
Taylor, John (West Lothian)


Deer, George
Lawson, George
Thompson, Dr. Alan (Dunfermline)


Dempsey, James
Mabon, Dr. J. Dickson
Thomson, G. M. (Dundee, E.)


Diamond, John
McInnes, James
Thornton, Ernest


Dodds, Norman
McKay, John (Wallsend)
Warbey, William


Dugdale, Rt. Hon. John
McLeavy, Frank
Weitzman, David


Ede, Rt. Hon. Chuter
Marquand, Rt. Hon. H. A.
Wells, William (Walsall, N.)


Evans, Albert
Millan, Bruce
Wheeldon, W. E.


Fitch, Alan
Mitchison, G. R.
White, Mrs. Eirene


Fletcher, Eric
Morris, John
Wilkins, W. A.


Foot, Dingle
Noel-Baker, Rt. Hn. Philip (Derby, S.)
Williams, W. R. (Openshaw)


Forman, J. C.
Oram, A. E.
Willis, E. C. (Edinburgh, E.)


Fraser, Thomas (Hamilton)
Owen, Will
Wilson, Rt. Hon. Harold (Huyton)


Ginsburg, David
Padley, W. E.
Woof, Robert


Cordon Walker, Rt. Hon. P. C.
Pargiter, G. A.



Greenwood, Anthony
Paton, John
TELLERS FOR THE NOES:


Griffiths, Rt. Hon. James (Llanelly)
Pavitt, Laurence
Mr. Cronin and Mr. Probert


Hale, Leslie (Oldham, W.)
Peart, Frederick

Proposed words, as amended, there inserted.

Schedule, as amended, agreed to.

Orders of the Day — Clause 37.—(APPLICATION OF INCOME TAX ACTS TO PUBLIC DEPARTMENTS.)

Sir Kenneth Pickthorn: I beg to move, in page 34, line 14, at the end to add:
(6) (a) Any person who receives from a public office or department of the Crown a payment under deduction of tax, being a payment under the provisions of the Income Tax Acts, including the preceding provisions of this section, which is the income of that person for

the year in which it is received, shall be entitled to an adjustment of his liability to income tax by way of repayment and shall be entitled to an adjustment of the amount of surtax assessable upon him to the extent set forth in paragraph (b)) of this subsection:
Provided that no one shall be liable to pay more tax or to lose an allowance as a consequence of the provisions of this subsection;
(b) if the payment described in paragraph (a) is calculated in respect of a period which does not fall entirely within the income tax year in which it is received, the person who receives the payment may elect by notice in writing to the Commissioners of Inland Revenue to have the payment treated as his income for the period in respect of which it


was calculated and to have that income apportioned to him within the relevant income tax years as if it had accrued to him from day to day
I hope that the Committee will bear with me on a matter, which it is not easy for a layman to explain, and very difficult indeed for me to convince myself that he is the person who has best understood. I am convinced that there is here something which has a permanent importance and which ought to be questioned at this stage. I think that retrospection, actual or apparent, in a Bill should always be challenged. I think also that anyone who looks at the language of Clause 37 will see that the language itself is extremely challenging—
The foregoing provisions of this section shall be deemed always to have had effect;".
Those words occur in line 44. In line 39, there is a reference to
a payment or sum as being not payable or not wholly payable as aforesaid shall be construed as a reference to it as being payable wholly or in part out of a source …
and so on. That I do not say is not defensible even in a court which might start with a prejudice against retrospection. The one on lines 44 and 45 must plainly be held to be provocative, and so also the lines at the top of page 34. If I may say a word, in excuse or defence of myself, I may boast that I never have noticed anything which was or looked like retrospective legislation in a Bill without making some challenge on it. I do not assert that retrospection is always intolerable. It is tolerable, perhaps, where the intention is to remove or to mitigate a manifest injustice or hardship.

The Chairman (Sir Gordon Touche): I am not quite sure how this arises on this Amendment.

9.30 p.m.

Sir K. Pickthorn: It is because this is a retrospective Clause and it was expounded in speeches in which the Chancellor of the Exchequer and the Attorney-General indicated what they regarded as being tolerable in the way of retrospection.

The Chairman: But this is not a retrospective Amendment.

Sir K. Pickthorn: But surely it must be in order, with every respect, Sir Gordon, to indicate why retrospection is

objectionable in this Clause as well as in other Clauses, although there might be some Clauses in which it was not.

The Chairman: The hon. Member should deal only with the Amendment.

Sir K. Pickthorn: I do not see how I can deal with the Amendment without dealing with the Clause, but I shall proceed directly upon that instruction to the story of what produced this Amendment. The Revenue won a case in the House of Lords, of which the essence was two points. The judgment decided two things, that by paying interim income under the nationalisation Acts in irregular, unequal and delayed portions the Crown, the majority of the Lords held, made such uneven payments taxable as payment of the year in which they were paid and thereby made the taxation, the Income Tax or Surtax, greater than it would have been if the payments had been spread. Secondly, the Lords held that the method by which the Revenue had got this money was illegal at the time when the money was got; and what we are now legislating to do is to say that it shall be deemed to have been legal all the time.
The Committee will observe that there were two effects of the House of Lords judgment. One of them was manifestly unjust and was indicated by the Lords at the time to be manifestly unfair. It was so plainly stated by the minority judgment, and it was hardly less plainly indicated in the majority judgment, where it said it was argued that, although payments of tax should not have been demanded before the sum had been received, now they had been received they could be spread back over the years: the three Lordships who agreed in the majority went on to say:
I would willingly accede to that argument if I saw anything in the Income Tax Acts which I thought would warrant it".
A little later they said:
A debtor —
the debtor in this case being the Crown—
ought not to be able to alter his creditor's liability to Surtax by delaying payment of his debt.
So, of the two things the Lords decided, that one was manifestly unfair.
The second one could be held to be unjust because it might enable the


people who had paid this Surtax to claim back what they had paid in a misunderstanding of the law. It could be argued that it would be equitable to let them do so, but I agree that it could also be argued that it would be unfair to let them do so. It would be to let them do it on what admittedly, in a sense, was a technicality, in that by the time the judgment was given more than six years had elapsed and therefore the Crown could not have gone back and claimed the money in the proper way.
There was, therefore, one manifest unfairness and one result of which it could reasonably be argued that it was unfair because it would cause the Revenue to disgorge. The House is at the moment invited retrospectively to legislate to put right the arguable unfairness in the interests of the Revenue but to do nothing about the manifest and indisputable unfairness.
I do not want to be longer about this than I must, or I could make many quotations, but the short point I wish to put is this: as I understand it, it has always been good law that tax statutes should be strictly construed and it was accepted of Income Tax Law that it admitted of no equitable consideration. If that were so, the Crown could not get what it is now asking us retrospectively to give it.
It has always, I believe, also been good law that a man who goes into the Lord Chancellor's Court to ask for more fairness than the common or statutory law would permit him, must come in with his hands clean. How much more must they have their hands clean who come to the High Court of Parliament to ask fiat for machinery which did not exist at the time when, in their interest, they used it—I admit they used it to take money which was due to them legally, but not by this machinery; this machinery did not exist at the time when they used nonexistent machinery to enable them to take what all the Lords who gave the decisive judgment held to have been an unfair amount, because the Crown had lumped payments, which may have arisen over five, six, seven or eight years, arising out of the Coal Nationalisation Act, in such a way as to put up the rates of taxation.
That is the short point, and I cannot see that in the short point, so put, there is anything to make one doubt that that is a serious matter. I am sorry that I had not more effectively explained beforehand this Amendment and the point of it to more people. It has not been easy, because the technique of getting an Amendment which would be in order is not very simple, and I got it on the Notice Paper only at the very last possible moment. I hope that I have put the short point fairly and I hope that I have put it so that it is plain.
There could be a great deal of elaboration to it. May I repeat myself for just one minute? Nobody said that these people ought not to have paid something like this amount of money. Everybody now says that these people ought not to have been made to pay the money as they were made to pay. Common sense, I think, says, and all the learned Lords indicated that in equity they ought not to have been made to pay so much.
When it comes to other things, taxation under other Schedules than this, and so on, different considerations apply—for instance, when doctors or railwaymen get pay back. A long time ago I very foolishly sold a book for £250, and as my entire income at the time was very little it bumped up my rate of taxation to an exceedingly considerable degree. That position no longer obtains, because the Lord Privy Seal when he was Chancellor of the Exchequer arranged that such earnings might be spread. This is not only the case of Surtax payers who were wicked enough to have had an interest in coal-mines.
What I am trying to do is not retrospective. I am trying to stop it happening in the future, and it is no use telling me that it is very unlikely to happen in the future. The Treasury Bench and their very intelligent and expert advisers cannot guess what the "wide boys" in the City will do tomorrow. Therefore, we have to legislate in all sorts of ways—sometimes to me disagreeable—in order to give the Treasury some hope of catching the wide boys.
I cannot tell what the Government are going to do in three or five years' time. I want to make sure that this effect does not arise when the Government owe considerable sums of money, which need


not be large. They need only be considerable in relation to the amount of money of the individual concerned, and in relation to his great disappointment because he finds that, though he gets the considerable sum of money, he gets it minus an unexpectedly high rate of tax. I want to make sure that in future, when a Government have considerable amounts of money to pay to persons of any sort, this bunching effect does not happen.
I am bound to say that I am very much strengthened in my view that this ought to be done by a note I received today from the Treasury. If legislation cannot be clone today or this year, Her Majesty's Ministers ought to promise us the earliest and most careful consideration of it. The note said:
… the grievance which you mention as arising in these colliery company cases has been dealt with in practice by an administrative arrangement for spreading 'interim income'".
That gives my case. We cannot be told that Ministers are extremely regretful about the extension of administrative discretion, but it is absolutely necessary in order to catch City tax sinners, and also be told that Parliament cannot do what is supported by common sense, and certainly by the highest judges in the highest court in the land, who gave the Government the decision they asked for. The Government won that case. It is not a case of putting right something which went wrong in the law courts. I cannot believe that, where it is a matter of seeing that in such things there are not hardships on the subject, it ought to be left to administrative discretion. I cannot believe that we ought not to find a way of legislating to prevent that happening in the future.

The Attorney-General: My hon. Friend the Member for Carlton (Sir K. Pickthorn) has dealt partly with the retrospective element of the Clause, partly with the Whitworth Park decision, and slightly with the Amendment. I want, without going outside the bounds of order on an Amendment, to reply to him. It is necessary, first, to remind the Committee of what the Whitworth Park decision was about and what it decided. It was of course, in relation to payments of interim income on coal nationalisation. Those payments were made for various reasons at varying

times, and when they were made it is true that it was disclosed that they were made in relation to certain periods.
The case arose on an issue whether those payments were chargeable under Case III of Schedule D or under Case VI. If they were charged under Case VI, Section 170 could not have applied. That is the Section which prescribes that one should deduct from annual payments—I deal with it quite generally—tax at the standard rate at the time of receipt; and there is no option about it when it comes within Section 170, which was formerly Rule 21—

9.45 p.m.

Mr. Houghton: The right hon. and learned Gentleman talks about tax at the time of receipt, but I suggest that it would be clearer were he to talk of deducting tax at the time of payment.

The Attorney-General: I do not mind. I should have thought that in this context payment and receipt would be contemporaneous, but let us say that tax should be deducted at the time of payment by the Minister of Fuel and Power and the time of receipt by the colliery companies.
The case went forward on that issue. If the company had been successful, the result would have been to have pushed, I think, a 15-month proportion of payment for the eighteenth months to June, 1948, into the 1946, 1947 and 1948 tax years for which Surtax assessment could no longer be raised. That was the issue, and the Crown, of course, succeeded in that case—

Sir K. Pickthorn: Not—of course.

The Attorney-General: I used the expression "of course" because everyone knows that the Crown succeeded in that case—

Major W. Hicks Beach: Surely, if the Revenue had had any doubt in the matter it could have served what is called a dual assessment, and there would have been no necessity to go further. It could have served an assessment under Schedule D and under the other Schedule under which, in fact, the case was brought. In other words, the Revenue made a mistake.

The Attorney-General: No, the Revenue served the proper notices, it was held to have served them rightly, and it succeeded—

Major Hicks Beach: But it was out of time.

The Attorney-General: I fear that my hon. and gallant Friend, who has just come in, has not been following me. I was dealing with the Whitworth Park case, in which the Crown succeeded. In the course of the decision, their Lordships observed that the Crown had no right to make the deduction under Section 170, and that is really what has led to this particular provision.
I would remind the Committee that this provision does not seek to make unlawful something that was lawful at the time when it was done. It has not that element of retrospection about it aft all. It seeks only to validate what everyone at the time thought was the right practice, namely, to deduct tax from this kind of payment—and that practice has been followed for very many years.
The consequence of that decision can be extremely serious to the Revenue. I shall not develop that at this stage, because I might be getting out of order were I to do so—particularly when it comes to tax under Schedule A—but the colliery companies were in this position. They received these interim payments from time to time, and there was, as my hon. Friend has said, some comment on the fact that for Surtax purposes there was no provision in the law that enabled these collieries to spread the Surtax back over a period of years.
There is a provision in the Income Tax Act, 1952, Section 238, to the effect that, Where the income from any assets which is chargeable to Surtax in any year by reason of the provisions of Section 170 is more than that which would have been attributable to one year if the income had accrued from day to day, and the taxpayer shows that his Surtax figure for that year is more than 5 per cent. above the amount which he would have paid if the income had accrued from day to day, there shall be such relief as may be just. The difficulty is that that has been held in the courts not to apply to one-man companies.
What was not known when this case was heard in the courts, although the col-

liery companies knew it, was that the Revenue was prepared to agree that for Surtax purposes this income which was related to a period could be spread. That affects the decision a great deal and really negatives my hon. Friend's statements about manifest and indisputable unfairness.
The Amendment is concerned only with the future because it cannot operate retrospectively to affect past payments; it is not so drafted. As regards the future, there are these considerations to be borne in mind. The requirement for deduction of tax is a general requirement. If the Clause is passed by the Committee, it will in future apply to the Crown. Payments made by the Crown are usually referable to a certain period, made quarterly or half-yearly, and they are usually made on the due dates. Indeed, it is only in very exceptional circumstances that an amount of interest or an annual payment made by a Government Department in a particular tax year would be greater than the amount attributable to the year concerned.

Sir K. Pickthorn: What does the revenue do? Why not spread?

The Attorney-General: I did not interrupt my hon. Friend. I wish he would let me try to deal with this as shortly as I can. I wish to cover the points he made and deal with them. I want first of all to satisfy the Committee, if I can, that there was no injustice here suffered by the colliery companies by reason of the fact that the Ministry of Fuel and Power in making the payments followed a practice which had been followed for years, deducting tax at the standard rate when making the payments. It is true that there was no statutory provision which applied to these companies enabling that income to be spread for the purposes of Surtax like the provisions such as I referred to in regard to the ordinary individual; but that has been dealt with by means of a concession.
The question, therefore, arises in relation to the Amendment: should we deal with this matter in relation to the Crown in the future? The difficulty about that is, first, that it is extremely unlikely that the same situation will arise. It can arise only in exceptional circumstances. Secondly, if it is to be applied in the future in spheres where


it does not apply today, the Amendment ought to be one of general application. To take the example of payment of mortgage interest in arrears, here again, under Section 170, deduction must be made at the standard rate at the time it is paid even though it is paid in relation to a period longer than a year. There can be other instances of that.
I must say that I do not myself see the reason for differentiating between payments made by the Crown in this respect and payments made by other people which may conceivably relate to a period longer than a year. There is a provision for adjusting Surtax which, in a great number of cases, will apply. There is no provision for spreading in relation to Income Tax such as there is for Surtax. The question of what year a particular item of interest is to be allocated to for Income Tax purposes is material, of course, if the rate of tax changes and if in one year the taxpayer would not be chargeable at the full standard rate on the whole payment by reason of personal allowances and other reliefs. But I am advised that it is not likely that spreading for Income Tax purposes would have given any colliery company title to any substantial repayment of Income Tax.
In general, the colliery company would not, even if the suggested provisions had been made retrospective, gain appreciatively by comparison with the treatment that they have been given. Under Section 170, which applies to everyone else except the Crown as the law now stands, it is the practice that the payment, whenever it is made—no matter to how long a period that payment may relate—still suffers tax at the standard rate in force at the time of payment.
I have endeavoured to deal as shortly as I could with the point raised by my hon. Friend, and I hope—I may not have succeeded—that I have been able to satisfy him that, because these payments had to be made at irregular intervals, because the Ministry of Fuel and Power complied with the law as it was generally thought to be, and because provision was made for spreading the liability for Surtax, there was no injustice here which is either indisputable or manifest. I would therefore ask the Committee to reject the Amendment.

Major Hicks Beach: In my right hon. and learned Friend's view, is this retrospective legislation or not?

The Attorney-General: I have said before, and I will say it again, that in one sense the word "retrospective" can be applied to it. But the word "retrospective" could be applied to many forms of legislation. My hon. Friend the Member for Carlton—and I agree with him—would not go so far as to suggest that all forms of retrospective legislation are always intolerable. They are not. We have had retrospective legislation in this House to indemnify Members for their conduct. The last case that I can remember was, I think, one in 1956. We had retrospective legislation to deal with charities after the Baddeley case, in which I was engaged in the House of Lords, in which it was held, to many people's surprise, that a great many village halls and that sort of thing could not be properly treated as charities. We passed legislation validating trust deeds retrospectively and with regard to deduction from royalties, when it was held to be wrong when those deductions were made by mining companies, legislation was passed to validate their conduct.
There is nothing unusual or wrong, in my submission, in making the law accord with what everyone has for years thought it to be and in accordance with which people have acted without the slightest complaint. The colliery companies knew perfectly well that tax was being deducted at source. They never complained about that. At that time it made no difference to their liability. If it was not deducted at source they could have been assessed on it and they would have had to pay. The only advantage which may arise for the colliery companies if the Clause is not passed is that they have issued writs, which may or may not succeed, depending among other things on whether their claims are time barred, to recover sums which cannot be levied upon by way of assessment. I suggest that there is no ground for running that risk.
I have dealt with the matter as narrowly as I could because the Amendment is wider than the Clause which stems from the Whitworth Park case. If one uses the word "retrospective" in its narrow sense, that is, that it has effect in relation to things which have been


done before, it is retrospective [Interruption.] I am glad that the hon. Member thinks that that is a remarkable statement with which he can agree.
It has none of the objectionable features of retrospective legislation. My hon. Friend, with his knowledge of the law, may think that the use of "retrospective" should condemn all forms of retrospective legislation. If he does. I do not agree with him. There are many instances when the House of Commons has thought it right to legislate retrospectively. Certainly, in my submission, it is right to do so where everyone has acted in the belief that the law was one way when, in fact, it has been held not to be that way and when nobody suffers any prejudice of which complaint can legitimately be made because of the actions being validated.

10.0 p.m.

Mr. Houghton: In the interests of good fellowship between the Attorney-General and his hon. Friends behind him, we had better drop the word "retrospection" right now. I prefer, in this context, the word "validation". The right hon. and learned Gentleman has right on his side in the approach to this sticky situation, although I wonder what the Government would have done if the Revenue had lost the Hinchy case in the House of Lords. Would they have come to the House of Commons and asked for the validation of the law as everybody thought it was for a hundred years?
It is true that none of the colliery companies or the Whitworth Park Colliery Company expected to escape tax on these interim payments made under the Coal Industry Nationalisation Act, 1946, and the Coal Industry (No. 2) Act, 1949. They fully expected to bear tax. In the course of these proceedings and challenges to the basis upon which the assessment should be made, however, the discovery seemed to have been made that the Crown had no right to make the deductions of tax from these payments under Section 170 of the Income Tax Act. That started something.
Of all the judicial seesaws, that case takes the biscuit. The Special Commissioners decided that the payments were assessable under Case 6 and that, therefore, the deductions could not be made under Section 170 and that the basis of assessment would be the spread of these

payments over the period that they covered. Then, the High Court decided that these payments were assessable under Case 3, which validated the deductions under Section 170 of the Income Tax Act. At least, if that was not the case, it decided that the basis of assessment should be the year of payment.
Then, the matter went to the Court of Appeal, which decided that it should be Case 6 but that it would not affect the final result, because the assessment should still be made on the year of payment. Then, the House of Lords finally decided that they were assessable under Case 3. That is a judicial seesaw—Case 6, Case 3, Case 6 and then Case 3 again. We cannot have it more evenly balanced than that. There is nowhere else to go for final answer as to which it should be. That is why we have to deal with it now.
I have sympathy with the Amendment of the hon. Member for Carlton (Sir K. Pickthorn) in this case, because after having gone through the hoop like this it would have been very hard on the company if the concession had not been made to give it the benefit of the more favourable arrangement. The flaw having been discovered, the Clause now not only proposes to validate the payments which may be made under Section 170 of the Income Tax Act, but also validates the deduction of tax by the Crown from payments it makes whether under Clause 3 of Schedule D or under Schedule A.
The Amendment is substantially met by what we have heard from the Attorney-General about what is happening in the Whitworth Park case. As regards the future and the general question of spread, it cannot be dealt with by the Amendment. It is a much too fundamental question affecting other Schedules, also. If there is anything to be done about that, it has to be done substantively in a different way. We are content with the Attorney-General's explanation and I think that my remarks will cover not only the Amendment, but most likely the Clause itself.

Major Hicks Beach: I support the Amendment. We had a reply from the Attorney-General, for whose views I have great respect, but there is only one really important observation which he made, and that was in reply to my intervention. He took a long time replying to it.
My intervention was: is this retrospective legislation or not? My right hon. and learned Friend took three minutes to explain that it was not. He finally conceded that it was retrospective legislation. We want to get the facts straight in this case. The facts are that in the case of these colliery owners—I hold no brief for them, because everyone thought that they should be assessed for tax and, I think, very properly so—the Revenue made a blunder. It could have given them a dual assessment if it were doubtful on the point under both these cases. It did not do so and it got out of time. Now it finds itself in the position in which it cannot go back and assess them under the proper Schedule because it did not give a dual assessment. The whole point of this Clause is a cover up for the Revenue. Let us be frank about it.

Mr. Houghton: The hon. and gallant Member for Cheltenham (Major Hicks Beach) says that the Inland Revenue made a blunder; it trespassed in error. It thought that it had the right to deduct tax and it had no reason to think otherwise. In those circumstances, I think that it can be excused for not taking precautions which did not appear to be necessary.

Major Hicks Beach: The Inland Revenue had five attempts before making up its mind that it was wrong. This is a point which the Front Bench should consider very seriously. Suppose this happens to the taxpayer. All of us who deal in practical taxation know of a number of cases in which, through a mistake like this, the taxpayer fails to put in a claim. If he does not do so within six years his claim cannot be supported.
I am glad to see the Chancellor here. I want to know whether, if we in this Committee can produce genuine cases of taxpayers in similar circumstances to this, where the Revenue has made a mistake or the taxpayers have made a mistake, and we can substantiate them as genuine cases, he will be prepared to introduce retrospective legislation so that the taxpayer has a right in exactly the same way as the Revenue has. That is what I ask for. It is quite a simple point.

Mr. Amory: In reply to my hon. and gallant Friend, may I say that there have been cases.The Attorney-General

referred to two where Parliament has validated procedure in the interests of the taxpayer and not in the interests of the Revenue.

Major Hicks Beach: Retrospectively'?

Mr. Amory: Yes, retrospectively.

Major Hicks Beach: Perhaps the Attorney-General will give me an example.

The Attorney-General: I gave an example in relation to the legislation which followed the Baddeley case. There are other instances which I could have given, is should have thought that they would have been within my hon. and gallant Friend's own knowledge.

Major Hicks Beach: The Attorney-General may remember a case which was put right a year or two years ago by the Government, in which, in certain circumstances where an estate had been wound up, it had to pay Estate Duty and Surtax, which meant that it paid more in taxation than the amount it received. That was not made retrospective. I should be happy to give the Attorney-General and the Chancellor many examples where the taxpayer has not been treated as well as the Revenue is in this case. That is my chief grumble against this.
I am against retrospective legislation, because I believe in the rule of law. I believe that the taxpayer is entitled to expect, certainly so long as a Conservative Government are in power, that this country will be governed under the rule of law. In this case —I will be quite frank—there is not a very strong case against retrospective legislation because everyone thought that the law was as the Revenue thought, but the fact remains that the legislation is retrospective, and this is a very bad precedent.
Do not let it be thought that I am against the Revenue. After all, my father was, if I may say so, a fairly distinguished civil servant for a great number of years. However, once we give the Revenue and the Treasury a precedent to think that the Conservative Pasty believes in retrospective legislation, we shall have it every time. We all know what has happened about retrospective legislation. Neville Chamberlain did it, I think in 1937, and Sir John Simon a year earlier.
I want it put on the record, and I believe that a number of my hon. Friends want it put on the record, too, that the Conservative Party is against retrospective legislation and believe it to be absolutely wrong. I shall certainly oppose it whenever it is introduced again, though I must confess that in this instance the Revenue has a fairly good case because the Revenue and the taxpayers thought alike what the law was. However, I hope we shall get an undertaking about retrospective legislation in answer to this debate tonight, that if we produce hard cases on behalf of the taxpayer they will be received with consideration.

Mr. Crosland: Retrospectively?

Major Hicks Beach: Certainly, the same as with the Revenue. I entirely accept that. What is good for the Revenue should be good for the taxpayer. Surely that must be right? We cannot have it both ways. If it is good for the Revenue, it is good for the taxpayer. The Chancellor must learn and the learned Attorney-General ought to learn that each has a duty to the taxpayer. He is not only a tax maker; he has a duty to the taxpayer.
I fully support the Amendment. I did not propose to move my own Amendment on the Paper because I thought my hon. Friend's was more comprehensive. I support it. Let it be put on the record that, as far as I am concerned, I am against retrospective legislation, as, I believe, a number of Members on this side of the Committee are. Do not let the Treasury and the Revenue think that this can be a precedent.

Mr. Powell: Sir Gordon, I had intended to address a few remarks to you on the Question, "That the Clause stand part of the Bill", but from the scope of the debate on this Amendment I hope that what I have to say will be in order now, and it will be, perhaps, to the convenience of the Committee if I make a few observations now.
In the situation which was disclosed by the judgment in the House of Lords in the Whitworth colliery case, which showed that the Revenue had obtained tax in the wrong way and at the wrong time, I do not believe there was any practicable alternative to the introduc-

tion of legislation of the kind which is before the Committee in this Clause, and, indeed, it is only when retrospective legislation damnifies a subject that it could possibly attract the displeasure of this Committee. In this case there is, however, a respect in which the subject is damnified by the validation retrospectively under this Clause of what was done by the Ministry of Power, and I wish to submit to my right hon. and learned Friend that, just as, administratively, a potential wrong, to which my hon. Friend the Member for Carlton (Sir K. Pickthorn) has drawn attention, has in fact been put right. so it should be considered whether this admittedly minor but nevertheless real damnification through the retrospective validation which we are now undertaking should not administratively be corrected.
When it was known, through the judgment of the Court of Appeal and subsequently of the House of Lords in this case that there was a claim against the Ministry of Power for having wrongfully withheld tax due in making the payments in question, it was not only the right but it was the duty of a large number of persons to take certain action.
10.15 p.m.
It was, for example, undoubtedly the duty of the liquidators of certain companies to take steps to re-instate those companies for the purpose of issuing writs and obtaining re-payment. I have no doubt that there were certain other persons who not only rightfully but dutifully issued writs or took steps to issue writs against the Ministry of Power in order to give effect to what was ascertained to be a legal right.
I submit that there is a strong case, since we are now frustrating that action and rendering that expenditure abortive, that administratively right should be done by that expenditure being met by the Ministry against which but for the action of this Committee the writs would he. This is a small matter and it is a matter which can be and probably should be dealt with administratively. If full right is to be done consideration should be given to that.

Mr. Green: I want briefly to support my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), because he has put the plea in equity in


this particular case very much better than I could have done. But I want to go a little further and say that I agreed with my right hon. and learned Friend the Attorney-General when he remarked in referring to the Amendment—and I noted his actual words—"perhaps it ought to be of general application." That was a phrase and a sentiment which I fancied was picked up and agreed with by the hon. Member for Sowerby (Mr. Houghton).
Although we heard a very great deal about retrospection, with which the Clause deals, the Amendment is not in itself of retrospective application. I sometimes wondered at the mental ingenuity with which some hon. Members stayed in order in discussing the Amendment when they discussed retrospection. In view of my right hon. and learned Friend's statement that "perhaps"—and do not deny that he used only the word "perhaps"—this Amendment ought to be of general application, and in view of the apparent agreement of both sides of the Committee with that suggestion, I invite my right hon. and learned Friend seriously to consider making it of general application. I should like to hear from him that he will give that serious consideration.

The Attorney-General: I am glad that my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) raised this point about the small particulars in which as he said these companies might be damnified. The position on that—and I touch on it lightly—is that some of them have issued writs, but I stress that it is by no means certain that if these actions were proceeded with they would succeed. They might succeed in some, but the Crown has been advised that it would have more than an even chance of success in defending the actions.
One does not want to damnify incidentally by legislation of this sort, and it has been decided that in all the circumstances it would not be unreasonable to pay the costs incurred in this litigation up to Budget day by the companies concerned—costs which had they been successful they might have been expected to recover under the head of costs. The Treasury Solicitor, in due course, on receiving the necessary particulars from the solicitors for the

companies, will pay their costs on a party and party basis so far as incurred up to and including Budget day. I hope the Committee will think that, bearing in mind the possibility that these actions would not have been successful, that this is really very fair treatment on the part of the Crown.
The question raised by my hon. Friend the Member for Preston, South (Mr. Green) is a very big one, and really I do not think that this narrow Amendment could possibly form a peg for making what would be a very drastic change in the whole sphere of Income Tax, and the whole application of Section 170, which, of course, applies to many people who make these payments and who make payments which may be, as I indicated, for periods which relate to more than a year.
That is a very big question, and before I could give any assurance about what might or might not be done on that it would have to be very carefully and fully considered. I cannot say more than that now.

Sir K. Pickthorn: I do not want to carry this on much further, but I think I might say one word to my right hon. and learned Friend if I am not already out of time, like the Inland Revenue. He should not restrict his learning to Halsbury's Laws of England. He might remember that the great Shakespeare made it clear that slight is a fighting word and I am bound to say that I did not find his argument any less slight than mine.
I did not say that there was an effect of injustice on the colliery companies. I said that there were two decisions, of which one was plainly of an unfair effect, and the other was arguably of an unfair effect, and that it was unfair for the House to be putting right one and not touching the other.
I had intended to say something, but I will not weary the Committee with it now, about people who incurred expenses on the strength of the Lords' judgment. I can now say only one thing. I see no relevance in the question whether they are going to win their suits or not. They were entitled to take the preliminary steps they took by the due course of lay, up to that moment, and it must clearly be necessary, in fairness, that the expense so incurred should be put right.
About this business of acquiescing in what everybody thought the law was, that one really will not do. I had not known until this afternoon that there was an attempt on foot to put down an Amendment which might affect—I am sure my right hon. and learned Friend knows it better than I do—the Kenmare case, where for twenty years the law was thought to be something, for about three years it was known by a judgment to be the opposite, and the House then put it back to where it was thought to have been, but the Revenue is doing its best to get every drop it can out of the three years during which the law was the wrong way round.
If that one can be put right by retrospective legislation, this stuff about our Clause not being retrospective—although I know some of my hon. Friends take the same view—will not do, because it is quite true that it is not retrospectively punishing somebody or forbidding something, but what it is retrospectively doing is taking away from some the legal right they had to have claims of theirs considered.
That is what it is doing, and if anything which does that as from a long previous date is not retrospective then it is no use our thinking that we can

continue with democracy, or Parliamentary Government, or any other kind of Government by discussion. It used to be said when I was in the Army:
They can do anything to you except kick you up the backside or put you in the family way.
The equivalent of such unbearable assault is the arbitrary mayhem of words so that debate becomes impossible.
I think that perhaps we have carried this far enough to make it plain that there are many of us who think that this sort of thing should be looked at a great deal more carefully. I am sorry that the Treasury Bench cannot tell us that it thinks so, is not content here to rest on administrative discretion as where conditions it desires to guard against are claimed to be indefinable. I very much regret in these circumstances that the Government do not find it possible to say that they will legislate in a definite way so that this shall not happen again.
With those words, if I may claim your attention from I cannot see whom, Sir Gordon—I was slightly dazzled by the back of the head of the hon. and learned Gentleman—I beg leave to withdraw.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

Clause 38 ordered to stand part of the Bill.

Orders of the Day — Clause 39.—(RETIREMENT ANNUITIES: RELIEF FOR PREMIUMS.)

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. Powell: It is a fortunate chance that our consideration of this Clause follows so closely upon our consideration of Clause 37. I noted particularly that my right hon. Friend the Chancellor of the Exchequer drew attention to the many cases in which Parliament has legislated retrospectively to put something right which had gone wrong to the disadvantage of the taxpayer.
In Clause 39 we are dealing with a case where a mistake was made in the Finance Act, 1956, and if one reads the relevant words in the 1956 Act, in the light of the correction which we are now invited to make, one sees that it is obvious that there was a mistake which would bring about—and, for all I know, in the intervening years has brought about—undesired results to the disadvantage of certain taxpayers. In this Clause we are correcting that mistake. But in this Clause we do not find the same words as in Clause 37, that the provision
shall be deemed always to have had effect.
Far from it. We find the words:
as respects qualifying premiums paid after the end of the year 1959–60.
It is a little ironical that, side by side and facing one another across the pages of the Bill, we should have a case where we are putting an error right—un-doubtedly rightly putting it right—to the benefit of the Revenue with the necessary proviso that it should have retrospective force, and an instance where we are putting a mistake right for the benefit of the taxpayer with the provision that it shall take effect only as from the current financial year.
This is a small matter and it may be that only a few people, if any, have been affected, although I imagine that in the four years there will have been some people affected by the error we are now putting right. I suggest that it is only equitable that we should go back to 1956 to put right an error as from the time when we ourselves made it.

10.30 p.m.

Sir E. Boyle: My hon. Friend has made an interesting point and one which I think, in the circumstances of the last hour, the Committee will agree to be pertinent. I will certainly undertake that this matter will be considered between now and Report.
I think that probably the number of people affected will have been pretty small. If between June and November the claimant had a birthday he would have had a less favourable annuity rate for the premium paid in November. In all the circumstances, my hon. Friend has raised a point of substances which we will certainly look at.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Orders of the Day — Clause 40.—(INTERPRETATION OF PART II.)

Sir E. Boyle: I beg to move, in page 36, line 12, at end to insert:
and includes any company whose profits on the sale of securities, land or buildings are part of its trading profits;
This Amendment expands the definition for the purpose of Clause 23 of "dealing company" at present defined by Clause 40 (4, d) as:
a company dealing in securities, land or buildings.
Certain companies, such as banks, are not allowed to treat securities as trading stock so as, for example, to bring them in each year at the lower of cost or market value and so do not rank as dealing companies in the full sense. Any profits or losses realised on sales of securities are, however, taken into account in computing their taxable profits. The mischief aimed at by Clause 23 could equally arise where such a company had engaged in transactions with a non-dealing associate. This Amendment extends the definition so as to bring any such company within the ambit of Clause 23.

Amendment agreed to.

The Solicitor-General: I beg to move, in page 36, line 20, to leave out from "avoidance" to the end of line 21 and to insert:
or reduction of an assessment to income tax or the avoidance of a possible assessment thereto, whether the avoidance or reduction is effected by receipts accruing in such a way


that the recipient does not pay or bear tax on them, or by a deduction in computing profits or gains
The Amendment provides a partially revised definition of tax advantage for the purposes of Clause 26. The reason for it, it might be argued, on past constructions of the latter part of the definition in the Clause as it stands, in some cases, such as those outlined by my right hon. and learned Friend yesterday, which are clearly intended to be within Clause 26, is that they involved no tax advantage. Perhaps I could put the argument in relation to one type of case.
Part of the original definition which has been replaced by the Amendment reads:
'Tax advantage' means … the avoidance of an assessment to income tax or the reduction of such an assessment.
It seemed to us that it would have been arguable under that definition that no tax advantage was obained in certain cases, as where a shareholder of a company sold specially created shares to a stripper of current dividends in the way described by my right hon. and learned Friend. He obtains in the price of his shares a Surtax-free equivalent of the profits which were enjoyed by the stripper by way of special dividends for a few years—I think it was a period of six years in the example given by my right hon. and learned Friend. It would be possible to argue that what he had received was capital and therefore not chargeable to tax. The argument would equally apply to the case of a reduction of capital on a large premium to be paid out of tax reserves.
In order to counter that possible argument it is necessary to provide that a tax advantage is obtained not only if there is an avoidance of an assessment, the subject matter of which is in existence, but also if there is an avoidance of an assessment that would have been possible if circumstances had been otherwise.

Amendment agreed to.

Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. Diamond: There is just one point I should like to draw to the attention of the Committee and ask for it to be considered by the Government. It is in

relation to the definition of "associated company" in subsection (1). An associated company is here defined rather narrowly and, of course, it has to be defined because previously in the Bill reference is frequently made to associated companies coming together to make arrangements whereby tax is saved and a tax advantage gained.
This definition is much too narrow because nothing is easier than that two companies which were not technically associated companies under the definition get together and make arrangements with one another, Those arrangements would not be arrangements in the ordinary course of trade, but would be concerned purely with creating a tax advantage. I should have thought, therefore, that there should have been a much wider definition to catch, not only associated companies defined in this way, but those which enter into transactions with one another for the purpose of getting a tax advantage. Otherwise it would be very easy for one company to enter into an arrangement with another, because it would be to their mutual advantage, and thus do damage to the Inland Revenue.
I cannot think of a better definition than the one used in other parts of this Measure, namely, entering into a transaction other than for bona fide commercial reasons. That would be a wide definition, but it is the only way to cover the purpose in the mind of companies when they work together in this way. I do no more than ask the Solicitor-General to give consideration to the point and ask if he is satisfied that having associated companies defined in this narrow way will be sufficient to prevent the malpractices which the Committee is anxious to prevent.

The Solicitor-General: I shall certainly look at that matter. I think that the safeguard lies in the very broad meaning of the word "control" in Part X of the Income Tax Act, 1952. Section 333 of that Act says:
'control', in relation to a body corporate, means the power of a person to secure, by means of the holding of shares, or the possession of voting power in or in relation to that or any other body corporate, or by virtue of any powers conferred by the articles of association or other document regulating that or any other body corporate, that the affairs of the first-mentioned body corporate are conducted in accordance with the wishes


of that person, and, in relation to a partnership, means the right to a share of more than one-half of the assets, or of more than one-half of the income, of the partnership.
The hon. Member will see that that is a fairly wide definition which, I think, provides the safeguard, but of course, in answer to his request, I shall look at the matter again.

Mr. Millan: The definition which the Solicitor-General has just read depends on the question of the shareholders, but the point which my hon. Friend the Member for Gloucester (Mr. Diamond) was making was that the definition under the Clause does not preclude people from working together where there is no formal shareholding relationship between the companies concerned. We all appreciate the extreme difficulty of introducing a definition which would cover anything as indeterminate as that.
10.45 p.m.
Nevertheless, this is a very important point, because some of the particularly important Clauses rest on this concept of "associated company". I need mention only Clauses 23 and 24, in which we deal with transactions between associated dealing and investment companies. We had considerable discussion earlier on Clause 26, which instituted rather wider powers than are introduced in any of the other tax avoidance Clauses.Obviously, the efficiency with which Clauses 23 and 24, to repeat the example, will operate will depend on whether the tax avoiders are able to find a technical excuse for coming outside these Clauses, and the obvious technicality on which they can avoid the Clauses is to have some sort of association which is not founded on any formal shareholding association but on something considerably less than that.
If we want to make the Clause effective and to avoid the wholesale introduction of Clauses similar to Clause 26 in subsequent Finance Bills to deal with the questions which have been specifically dealt with in Clauses other than Clause 26, we shall have to look very carefully at the question of associated companies. It is not just a technical point and it is not a point which rests wholly on the shareholding angle. It is a question whether it is possible for tax avoiders to avoid the Clauses in the Bill by the kind of relationship which I have described.
Since we all support the idea that, as far as possible, we should avoid any sort of general powers under the kind of Clause we have in Clause 26, it will be worth while for the Government to look at the question of associated companies as carefully as possible and, if possible, despite all the difficulties of definition, to try to provide something more stringent that we have at present in this Clause.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Orders of the Day — Clause 41.—(NEW PROVISIONS AS TO PENALTIES AND RECOVERY OF TAX IN CONNECTION WITH INCORRECT RETURNS, ETC.)

Mr. Barber: I beg to move, in page 37, line 19, to leave out "have been compounded" and to insert:
were compounded before the commencement of this Act".
This is a drafting Amendment and is self-explanatory.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Orders of the Day — Clause 42.—(NOTICE OF LIABILITY TO TAX.)

Mr. Mitchison: I beg to move, in page 37, line 32, to leave out "fifty" and to insert "one hundred".

The Deputy-Chairman: It would be convenient to discuss at the same time the following Amendments:
In Clause 44, page 39, line 25, to leave out "fifty" and to insert "one hundred".
In page 39, line 26, to leave out "twice" and to insert "three times".
In Clause 45, page 40, line 3, at the beginning to insert "twice".
In Clause 47, page 40, line 44, to leave out "five hundred "and to insert "one thousand".
In Schedule 6, page 73, line 23, to leave out "fifty" and to insert "one hundred".
In page 73, line 24, to leave out "twice" and to insert "three times".
In page 73, line 32, at the beginning to insert "twice".
If the hon. and learned Member wishes, there could be a Division on more than one of them.

Mr. Mitchison: I will move the Amendment more or less formally. All these Amendments are on the subject of penalties. There appears to be a systematic change in the law upon which the Attorney-General was prevented only by considerations of time from addressing us on Second Reading. I hope that we shall have his views now and then perhaps have time to consider them afterwards.

The Attorney-General: I think that it was about the same time in the evening that I started dealing with penalties on Second Reading, but I will gladly accede to the request of the hon. and learned Member for Kettering (Mr. Mitchison), in the hope that it will assist the whole Committee to see the scheme against its background. I should first explain, I think without any controversy, that the effect of all the Amendments is to enlarge the maximum penalties prescribed in the Bill.
I want to start with what is common ground. Everyone who knows anything about this subject will agree that the penalties prescribed under existing legislation are both confused and wholly illogical. Nearly all those will go. All the illogical and confused ones will go. Perhaps one or two minor ones, which we need not bother about, will be left unchanged. It was, and I think is, the general view that the maximum penalties prescribed under existing legislation are often grossly excessive in amount, and many people take the view that the penalty ought to be related to the tax lost to the Exchequer as a result of the taxpayer's misconduct, instead of being related, as it often is nowadays, to the tax on his total income.
We have adopted throughout the penalty provisions, where the yardstick is in relation to the taxpayer's liability, the yardstick of the difference between the tax he ought to have paid if he had made a proper return and the tax that he would be liable to pay on the return that he has made. We have accepted the view that the standard should relate to the tax omitted.
The third subject which was much criticised at the time of the Hinchy case was the fact that where proceedings are taken in the High Court the court has no power to mitigate the penalties. The

Treasury and the Inland Revenue have under our existing law power to mitigate, both before and after judgment. Under our proposals, where proceedings are taken before the courts the courts will have power to fix within the ceiling prescribed by the Bill the penalty which they think appropriate in relation to the taxpayer's conduct.
Finally, the view has been expressed in a number of quarters that penalties ought not to be used as a means of recovering tax over six years old which is out of date for assessment. For many years the penalty provisions have been used for that purpose, and it has been common knowledge. The use by the Revenue of the penalty provisions up to date had a twofold objective. The first objective has been the recovery by the Revenue of the tax which the taxpayer ought to have paid, even though it was a liability more than six years old in relation to which an assessment could not be made. The second objective has been the imposition of a penalty upon him for his misconduct.
That was all under the one process, and it worked fairly well, because the Revenue did not seek to levy, although it had power to do so under the Statute, wholly extortionate penalties. It proceeded in the case of neglect to use the penalty machinery for recovering all back duty, plus interest, sometimes with something else on top. Although the sum for which Mr. Hinchy sued was very large in relation to the amount of tax omitted on the one return, it was not omitted only from that particular return. In the Hinchy case, it was common knowledge that Mr. Hinchy would never have been called upon to pay the full amount of the liability, but that high ceiling was useful to achieve that end, namely, the collection of back tax.
We thought it right, in making this entirely new approach, to scrap a tremendous amount of dead wood, as the Committee will see if it looks at the Schedule, and to separate the two functions, the function of collecting the back tax and the function of punishment, the penalties. They are two distinct elements. For back tax collection, we propose this new system. The Revenue can, of course, make any assessment going back any number of years in relation to fraud and penalties


can be imposed in relation to fraud over a number of years beyond the six. In relation to neglect, where it appears from the course of conduct in the last six years for which the assessments can be made that there has been conduct before those six years leading to tax not being paid, then the Revenue can reopen assessments and make fresh assessments for the earlier period of six years.
This has the corollary, not unrelated to what my hon. Friend the Member for Carlton (Sir K. Pickthorn) and my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) said a little time ago, that, where that six-year period is lifted, where the fence is lifted and the Revenue can go back and make fresh assessments for more than six years because of a course of conduct, the taxpayer will for the years in question in relation to which such assessments have been made be entitled to put forward any claim which he, for his part, inadvertently omitted, the object being to ensure that we collect only the back tax which the taxpayer ought to have paid and not a penny more in tax.
Let us suppose that a course of conduct has gone on for more than twelve years and there is ground for thinking that it started before the twelve years. Here again we say that the Revenue ought to be entitled to collect the back tax, but we have proposed in the Bill the additional fetter that the Revenue will not be able to do that and reopen for an earlier period without satisfying the courts that there really is a case which warrants it being done. The Revenue can go on with that process until it reaches a stage when it can say, "This is the duty which ought to have been paid, and we have collected it".
I am sure that both sides of the Committee will agree that taxpayers who are guilty of neglect or default in the making of returns for Income Tax purposes should not, no matter how long the neglect or default has continued, benefit thereby in avoiding tax. I hope that in whatever discussions we have on the penalty Clauses we shall have agreement and approval for that part of the scheme proposed by my right hon. Friend.
On top of that, we have thought it right to make a provision for the payment of interest by the taxpayer on the money of which he has had the use

during the period since his default, simple interest at 3 per cent. In that part of the machinery contained in this Part, we believe we have devised a way by which all back duty and interest on it can be recovered.
The question raised by the Amendments is really this. Bearing in mind that all the back duty can be collected, what should be the proper maximum limits for the penalties relating to the conduct of the taxpayer? I am sure—I hope I have made myself clear—that there is now no need whatever for high maximum penalties of the kind that the Statutes contain, because the recovery of the back duty element is completely taken out.
We have considered carefully what should be the proper scales. One does not get much help by contrasting the penalties which we propose with the penalties of the existing legislation, bearing in mind that the maximum penalties we propose are super-imposed on the liability to pay the back duty plus interest.
I ought to have made it clear that one penalty year was used to cover a whole number of years in which there had been default. I need not take up time with that. The maximum penalty for negligence which we have fixed has been determined on the basis that it ought not to be much greater than the penalty which will be sought by the Revenue in the worst cases in which fraud cannot be proved. That is the yardstick that we have taken. It should be a little bit greater, but not much greater, than the worst cases. There should be a certain amount of flexibility. In the past, it has not in general been necessary for penalty purposes to make any distinction between fraud and negligence because of the vast maxima which there have been for both.
In general, the penalty part which has been imposed in practice has been between 50 and 75 per cent. of the tax underpaid. What we propose is a penalty of £50 plus the amount of the tax omitted through negligence, and for fraud a penalty of £50 and twice the amount. I am taking it as shortly as I can and I (hope that I am being strictly accurate. The tax is recovered under a separate provision; the interest is recovered under a separate provision. On


top of that, there is the amount of tax which can be recovered as a maximum for the penalty. In cases of fraud, it is £50 and double the amount.
Bearing in mind the current practice of the Revenue, which has existed for many years, the Revenue is satisfied that these penalty maxima are right and that no more is required. My intention was that we could discuss in Committee whether there was any advantage in putting up a higher penalty or a greater range of penalties than has been imposed by the Revenue in the past. I do not think that there is any advantage in doing so. It is right to have regard to the current practice and to fix the maximum limits in accordance with that. We can discuss that in detail, but I hope that it is helpful to the occupants of the Opposition Front Bench for me to indicate the basis on which we have worked and why we have fixed these limits.
11.0 p.m.
I do not know that there is very much more that I can say at this stage to help the Committee. I thought that it would be helpful to the Committee to show the approach that we have made. We can discuss—we probably will—on these various Amendments whether a particular limit is right or wrong, but the case I will make for the limits which have been fixed is that they are limits which take into account and have regard to the existing practice of the Revenue. We think, bearing in mind in relation to fraud that we can have several penalty proceedings if the fraud has gone on for more than one year, that the maximum is sufficient to act as a deterrent and to give full power to the Revenue and the courts to impose penalties which should meet and deal with the misconduct of the individual taxpayer.

Mr. Mitchison: May I ask the right hon. and learned Gentleman two questions? It is late at night, and I hope that they will not take him long to answer. The first is this. He mentioned that there were outstanding penalties in other parts of the Income Tax Acts than those referred to in the Schedule which have not been included. Was that deliberately done? He sees no advantage in getting all the penalties together in one part of a single Act? That is the

first question. The second one is, I hope, capable of easy answer. Apart from penalties under the Income Tax Acts, there is an obvious channel for prosecutions for perjury against people who make fraudulent returns. Is there any other under the ordinary criminal law?

The Attorney-General: Yes, I think there are. I will say a word about it if the Committee will bear with me. I can give details when we resume on the penalties which remain untouched. They are all for minor offences and are small penalties, and they do not really fit in very well with this new code. I can give the details. I think the hon. and learned Gentleman will see that really it is best to leave them just as they are. I believe there are only about two of them.
What I ought to have mentioned is that on top of this liability for penalty under these proceedings there will be liability for prosecution. There is prosecution under the Perjury Act, and there is also power to prosecute under—I think I am right in saying—one or two other Acts. I have not got them actually in mind. Perhaps I could give them to the hon. and learned Gentleman later and not take up time with that now. But there are other provisions.
There is one point with which I think I might deal. It may be helpful to the Committee. It is sometimes said, "You prosecute the small men, but you do not prosecute the big ones." I should like to say a word on that. Of course, the hon. and learned Gentleman will remember cases where we get false claims for allowances for a non-existent wife or child, and they do lead to prosecutions. The figures are very small. In the last three years to the end of March they are 41, 54 and 31 for false claims for personal allowances, and 16, 9, 26 for Schedule D offences.

Mr. Mitchison: Under the Perjury Act?

The Attorney-General: I cannot give details at the moment. I am not sure about that. They are all criminal prosecutions.
I think the Committee will agree that the imposition of a penalty is an obvious way of dealing with an Income Tax offence, and until forty or fifty years ago all Income Tax offences were dealt with


by means of penalties, but that does not mean that where we get a blatant, deliberate fraud there should not be prosecution, and, of course, there have been these personal allowance claims which are false and clearly are of a deliberate and blatant sort, and the facts rarely admit of dispute.
I am certainly not one of those who think that the big cases should not be the subject of prosecution, but there are difficulties, as the hon. and learned Gentleman will know, about prosecutions in such cases. For one thing, it is very difficult indeed to recover the full extent of back duty without some degree of co-operation on the part of the taxpayer. That would not be forthcoming if he thought that in any event he would inevitably be prosecuted, but he gets very heavily punished under existing procedure, and will be under this procedure, by having to pay all the back duty, interest, and a penalty on top. I can deal with this more fully at a later stage.
There is no ground whatsoever for thinking that the Revenue is seeking to treat the smaller taxpayer more harshly than it does the big taxpayer who does not comply with the law. The big cases present difficulties which are not so apparent in the small cases. Perhaps we can deal with that more fully when we resume.

Mr. Houghton: I am sure that the Committee is very grateful to the Attorney-General for his very careful and clear explanation of the Chancellor's approach to this difficult problem and of the pattern which has been adopted to make the structure of the penalty Clauses more coherent, more logical and on the whole probably fairer.
I dissociate myself completely from much that was said about the practice of the Inland Revenue in the matter of penalties at the time the Hinchy case was on its way to the House of Lords. Some of it was malicious but a good deal of it sprang from a misunderstanding of the actual use of the powers for imposing penalties which the Inland Revenue possessed. The Attorney-General has described to the Committee the use to which the Inland Revenue put its wide powers to impose heavy penalties in order to overcome the weaknesses in the Act, first as regards time and secondly as re-

gards interest. It used the wide margin in hand within the existing penalties to remedy some of the deficiencies elsewhere in the law. That may not have been strictly appropriate to the use of the powers which it was given but it seemed to be right in the interest of the public.

The Attorney-General: It had judicial approval.

Mr. Houghton: Yes, it had judicial approval. There is a good deal else in connection with the use of powers for imposing penalties which received not only judicial but Parliamentary approval. A one-time chairman of the Board, giving evidence before the Committee of Public Accounts, said that he conceived the job of the Inland Revenue to be to collect tax and not to make criminals. There is a good deal in that because, as the Attorney-General has said, it is not easy to recover tax and send people to prison at the same time.
Some penalties here have no relationship to the amount of duty lost. The Attorney-General did not say much about them. There is, first, the penalty for failure to give notice of liability and secondly there is the penalty for failure to comply with the notice served by the tax authorities. Then there is in Clause 47, for example, a penalty not exceeding a certain sum for aiding and abetting. In none of those cases is the penalty related to the amount of tax lost.
The first thing we have to ask ourselves is whether those penalties are adequate to the failure of the taxpayer. For example, in Clause 42 (3) the amount of the penalty for failing to give a notice which is required is £50. In Clause 43, failure to comply with a notice served can insure a penalty of £50 and a further penalty
… not exceeding ten pounds for each day on which the failure so continues.
It is interesting to observe in this connection that the penalty I have referred to under Clause 43 is exactly the one which the Codification Committee recommended twenty-five years ago. Should it be increased in 1960 over the sort of figure which was thought of by the Codification Committee of 1936? The Codification Committee was proposing to substitute that lighter penalty for a much heavier one under the Act as it stands at present. In Clause 47—

The Attorney-General: Might I just point out that under Clause 43 (1) the penalty is £50 and a continuing penalty not exceeding £10 a day where the return does not relate to the taxpayer's own income; but under subsection (2), where there is a failure in relation to his own income, the penalty is not to exceed
— the aggregate of fifty pounds and the total amount of the tax with which the said person is charged (whether for one or for more than one year of assessment) —.
so I do not think it can quite relate to the Codification Committee because it is split up here.

Mr. Houghton: I had not lost sight of that. In Clause 43 there is provision for failure to comply with two different sets of notices: first, a notice which does not relate to the taxpayer's own tax liability, and secondly a notice which does. I agree that there is one penalty for the return which does not relate to the taxpayer's own liability, and a higher penalty for failure to comply with a notice that does relate to it.
There is running throughout this pattern of penalties a failure to pay regard to the change in the value of money. I was referring, when the right hon. and learned Attorney-General intervened, to the penalty not exceeding £500 provided in Clause 47 for aiding and abetting. That, in fact, is exactly the same figure that the Codification Committee recommended in 1936. As the Attorney-General says, the adequacy of these penalties can be looked at when we come to them in detail, but it seems to me that they were lenient having regard to the two factors: first, the change in the value of money, and, secondly, that in these outright money penalties the taxpayer's liability is not involved and therefore there can be no additional penalty on account of loss of tax.
11.15 p.m.
I think that the major Clauses which the Committee will want to consider carefully are Clauses 44 and 45, which deal with fraud and negligence respectively.
The Amendments to Clause 44, page 39, lines 25 and 26 propose to stiffen the penalties for fraud; to increase £50 to £100, and to increase the penalty as regards the loss of tax from twice to three times the amount of tax lost. As regards negligence, we think that the penalty of

£50 could well remain, but the amount of the penalty related to tax undercharged should be twice the amount and not the single amount of the tax undercharged. In that context the Codification Committee recommended a penalty of £20 and three times the difference between the tax charged and the tax that ought to have been charged.
I agree with the right hon. and learned Gentleman the Attorney-General that what we have to do in approaching this difficult question of penalties is, first, to recover the tax, and to go right back to do so; secondly, to charge interest; and, finally, to decide on the penalties which will be imposed over and above the other two. It is the total of the interest and the penalties on top which we really have to regard as the penalties imposed on the taxpayer, because recovery of the tax which should have been charged is no more than he was due to pay and, although it may be inconvenient for a taxpayer to have to pay a considerable sum at one time which he ought to have paid over a period of years, we cannot be unduly sympathetic with the taxpayer who puts himself in that position.
The grand total of recovery of the tax lost, the interest on the tax lost, and the penalties on top may well be a serious one for the taxpayer, but we have to look at the penalties by themselves as being the real deterrent factor which the penalty Clauses are intended to provide.
The new pattern of penalties still leaves behind a good deal of miscellaneous stuff in the Income Tax Act. Some of it is probably obsolete and some of it is of such minor importance that it is not worth bothering about. I do not suppose, for example, that we need trouble ourselves with the £10 penalty which can be imposed on a rating officer who refuses to allow the tax authorities to copy the rate book. I do not really suppose that we need bother with the penalty of £100 and dismissal which may be meted out to an inspector found guilty of certain misdemeanours. I have not heard of a single case in forty years. Usually it is enough either to sack him or to take proceedings against him, when he usually goes to prison.
There is a miscellany of cases in the Act which relate to penalties of one kind or another, though I do not think that we need be unduly concerned about them in relation to the penalties which


are intended to deal with fraud, negligence, and other malpractices in connection with a taxpayer's liability and obligations on other persons in connection therewith.
There is another fallacy that many people entertain about our present taxation system and the relationship of penalties to the present level of taxation. I do not believe that the present level of taxation necessarily contributes very much to the extent to which taxpayers fail to make returns, or forget things, or deliberately make false statements in their returns. I have been doing a little research into past reports on this subject. Here is the Report of the Select Committee of 1905 on this very question when Income Tax was Is, in the pound. The terms used and the concern expressed then about these matters were in much graver language than we would employ today.
Then there was the Royal Commission on Income Tax of 1920 which had a good deal to say and was very concerned about the amount of tax lost. Each of those Commissions and the Codification Committee and the Radcliffe Commission had things to say about what taxpayers were doing and the penalties which should be imposed on them for failing in their legal obligations to the Revenue. This has been going on for a long time and there are probably many other checks and curbs against these malpractices which are, or could be, employed by the Inland Revenue and which would save the taxpayers from themselves. One of them is Pay-As-You-Earn, and another the obligation on persons paying interest, fees, wages or salaries to make returns to the tax authorities. The taxpayer is thus spared the dilemma of whether to disclose that source of income or not. Some of them fail to disclose all their income and are very surprised when they get a tactful letter from the Inland Revenue asking them if they have forgotten something.
Those are also part of the apparatus for the prevention of fraud and evasion. The penalties are there for those who escape the other safeguards which are erected for the protection of the Revenue.
Generally, the whole Committee will welcome the new pattern of penalties as being better than the old, certainly

better to look at than the old. If one took the old penalties literally, one was frightened by the Inland Revenue's powers. Although when talking to my legal friends I explained that the Revenue authorities never used those powers in their full rigour, my friends were unconvinced. The fact that theoretically the Revenue was able to impose such penalties and that not even the courts could mitigate them seemed to shock their ideas of constitutional principle.
The rationalisation of the penalty Clauses is to be welcomed. All we shall have to discuss in detail will be whether certain penalties are adequate in the circumstances of today after taking into account the Revenue's power to go further back now than it has been able to do before, and also the matter of interest, but having regard also to ideas which have been thrown up by reports of committees in the past.

The Attorney-General: I am grateful to the hon. Member for Sowerby (Mr. Houghton) for giving us notice of his approach to the penalty provisions and I can say that I hope to satisfy him, when we get to the various detailed proposals, that the limits which we have put in the Bill are about right. I am grateful to him for giving us notice and we will certainly consider what he has said when we resume our discussion.

Mr. H. Wilson: I beg to move, That the Chairman do report Progress and ask leave to sit again.
I think that it will be for the convenience of the Committee to adjourn our debate now. I join with my hon. Friend the Member for Sowerby (Mr. Houghton) in expressing thanks to the Attorney-General for his very helpful and lucid account of the position which. I am sure, will greatly benefit the Committee when we resume our consideration of these questions on Tuesday. By spending a little extra time this evening doing that, the Attorney-General has enabled the Committee greatly to shorten the debates on Tuesday. Obviously, we will have to keep a free hand on how we shall handle the Amendments. My hon. Friend, in an equally clear and lucid speech, expressed his first reaction to what the Attorney-General had said and his general approach, but, fortunately, we


shall have a day or two to think out the implications of what has been said and I think that it would only waste time if we went on with the debate now.

Mr. Amory: I am sure that what the right hon. Member for Huyton (Mr. H. Wilson) said is right. Personally, I think that there is nothing like an hour's discussion on Income Tax penalties and assessments to induce a profound desire for slumber. I think it right that we should adjourn now and turn our steps towards home and indulge in the sleep of the just.

Question put and agreed to.

Committee report Progress; to sit again upon Monday next.

Orders of the Day — POLICE, BRIXTON (INCIDENT)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. E. Wakefield.]

11.25 p.m.

Mr. F. A. Burden: I do not wish it to be understood that my reason for raising the case of Mr. Thompson on the Adjournment is in any way to restrict the proper performance by the police of their duties. In fact my reason for raising this matter is quite the contrary. I believe that generally the courts have opportunities to expose any over-zealous activities on the part of the police and that is as it should be. But I believe that this House should be equally zealous of the rights and liberties of the subject.
I felt it my duty to raise the matter as a result of a report which appeared in the Daily Telegraph of Tuesday, 19th April. It stated:
A motorist who stopped late on Saturday night outside Brixton police station to tell a motor cyclist that his rear light was not working, 'was dragged into the police station' after speaking to the motor cyclist, a police officer off duty, the Lambeth magistrate was told yesterday.
P.c. Ronald Woodman said that Mrs. Thompson came into the police station after her husband. 'She was very excited. I told her to go away but she refused. Her breath smelt strongly of drink and I arrested her for being drunk and disorderly.'
Mrs. Thompson said she had only three small gins that evening. 'My husband was in the police station and I asked to see him. They refused to let me see him. They didn't tell me what my husband was being questioned

about. I didn't find out until afterwards. My husband pulled up to talk to a motor cyclist who had no rear lights on the back of his bike and who had been driving very badly. It happened to be a police officer and he took my husband into the police station. Any woman would have been excited if her husband was dragged into a police station. Giving evidence on his wife's behalf Mr. Thompson said: 'I was taken into the police station after I spoke to the motor cyclist who had no rear lights. My wife had only three drinks that evening. I heard her being arrested when I was at the rear of the station'.
The magistrate said:
'There is a slight doubt whether she was excited because her husband had been taken into the police station or whether she was excited because she had had too much to drink.'
That report was read widely throughout the country, and I believe it to be in the interests of the police and the public that the facts should be elicited. If they are in favour of the police, that is perfectly all right with me, and I am sure that the police and the public and everyone else would welcome an opportunity to hear the whole facts. The newspaper report implied impropriety on the part of the police.
On 5th May I put a Question to my hon. Friend. I asked
… why Mr. Thompson, a motorist, who stopped to inform a police office off duty late on Saturday, 16th April, that the rear light of his motor cycle was not working, was taken into Brixton police station; why his wife was not allowed to see him; and if he will make a statement.
My hon. Friend the Joint Under-Secretary of State for the Home Department said:
Mr. Thompson was reported by two officers of the City of London Police returning from duty by motor cycle to the officer on duty at Brixton police station for an alleged offence against the Road Traffic Acts. According to the officers concerned, no reference was made to the rear light on their motor cycle. After investigation the Brixton officer decided not to charge Mr. Thompson. An apology was tendered to him, and he was allowed to go. His wife was not allowed to see him because her behaviour on entering the police station led to her being arrested and charged with another offence. The charge was later dismissed.
In a supplementary question I asked:
Can my hon. and learned Friend say how it is that there appeared in very responsible newspapers the statement that Mr. Thompson had reported to a police officer that his rear light was not operating and that, as a result of that action, he was taken into Brixton police station? Is he aware that in fact no charges whatever were pursued against Mr. Thompson; that according to Press reports his wife


appeared in court the following day charged with being drunk and disorderly, and that the magistrate …
dismissed the charge in the terms I have already indicated. I asked if it was not likely that in the circumstances this woman would be excited, and suggested to my hon. and learned Friend that the wife of any man arrested under these circumstances might become emotional and excited. I find, quite frankly, nothing surprising in that in the circumstances. It was pointed out that these were City of London policemen off duty or returning to their duty. I wondered, and still wonder, why my hon. and learned Friend did not honestly say that they were off duty, because in fact I understand they were and they were probably returning to their homes. My hon. and learned Friend said:
The City officer found that his rear light was not working, but neither he nor the other officer recollect Mr. Thompson having drawn their attention to it at any stage.
The hon. and learned Member for Leicester, North-East (Sir L. Ungoed-Thomas) asked:
If the behaviour of the police officers was completely correct, for what exactly did they apologise? "—[OFFICIAL REPORT, 5th May, 1960; Vol. 622, c. 1253–4.]
My hon. and learned Friend said that in the circumstances apologies were always tendered.
On 12th May I pursued this matter and asked my hon. and learned Friend if he would say if the two officers who took Mr. Thompson into custody were in plain clothes and:
whether he first spoke to them or they saw some reason for approaching him first?
My hon. and learned Friend said he was not then in a position to give an answer to that question. I hope that he will be tonight. I also asked whether Mrs. Thompson
was examined by a doctor before being charged
and my hon. and learned Friend said she was not. He went on to say:
The two cases, although they were both cases of drinking are not strictly comparable, because they are slightly different offences. One is for driving under the influence of drink and the other is for being drunk and disorderly."—[OFFICIAL REPORT, 12th May, 1960; Vol. 623, c. 617.]
Last evening I thought I had better see Mr. Thompson in order to get his point of view. I was very careful not

to lead him to say anything that might be strictly inaccurate and I took down exactly what he said. He said he left the Elephant and Castle at 10.30 and saw a motor cycle and sidecar with no rear-light. At Kennington, when he was held up by traffic lights, he jumped out and approached the motor cyclist and said, because, he asserts, he felt that the motor cyclist was driving rather badly: "Take it a bit steady. You have got no light on the back" He then stated, "One of them retorted, You had better tell a policeman'." His reply was, "I probably will."
He then drove towards Brixton and at the traffic lights just outside the police station he was stopped by the red light, and he was then forcibly removed from his car by these two men in mackintoshes who at this stage disclosed that they were police officers. He was taken into the police station where he asserts that he was, as he clearly was, examined by a police surgeon, who found that he was not drunk, and he was given the keys of his car and he could have driven it away. He was released at 11.45 p.m. and at 12.15 a.m. he was advised that his wife was being charged with being drunk and disorderly. He ultimately bailed her, and she appeared in court the next day and the case was dismissed.
Those are the facts as I know them and that is the statement which Mr. Thompson has made. It may or may not be strictly accurate, but this whole matter should at least be brought into the open, and I should like to ask my hon. and learned Friend several questions. I would point out to him that both Mr. and Mrs. Thompson under oath in court stated that they had informed the riders of the motor cycle that the rear light was out. The City officers ultimately said that they found that the rear light was not working but the very next morning neither one nor the other could recollect Mr. Thompson having drawn their attention to it at any stage, "recollect" being my hon. and learned Friend's word.
It seems to me extraordinary that two police officers should not recollect whether Mr. or Mrs. Thompson had drawn their attention to that. Does my hon. and learned Friend believe that two trained police officers the next morning after this incident just cannot remember


or cannot "recollect"—that is my hon. and learned Friend's word, not mine?
I should like to know what caused the two officers to conclude that Mr. Thompson was drunk in charge. Did it suddenly occur to them conveniently right outside Brixton police station? Or did they have cause to believe at some stage earlier that this man was drunk in charge? If so, why did they not stop him immediately, because if they were convinced that he was drunk, he would be driving to the danger of himself and the public?
Whatever the other facts may be, it was quite natural that Mrs. Thompson should follow into the police station to try to find out what had happened to her husband. According to the evidence of the police constable in court the next day, he told her to go away. Where could she go? Her husband was in the police station being questioned and the keys of the car were in the possession of the police. She knew her husband's circumstances. Would not my hon. and learned Friend agree that in the circumstances, as the two cases were linked, it would have been far better had the police surgeon been asked to examine Mrs. Thompson? At least there would have been an opportunity of establishing whether at the time of her arrest she was suffering from emotion as a result of her husband's circumstances or from drunkenness. In any case, my hon. and learned Friend stated the position rather differently from the police constable in court.
My hon. and learned Friend stated that Mrs. Thompson was not allowed to see her husband
because her behaviour on entering the police station led to her being arrested and charged with another offence.
P.C. Woodman stated that Mrs. Thompson
came into the police station after her husband. She was very excited. I told her to go away, but she refused … so I arrested her for being drunk and disorderly".
Perhaps someone with a little more experience than this officer apparently had, realising the circumstances, might have said to this woman, "Would you wait? Your husband is inside. He will probably be released in a little while. Will you sit down? Just to tell her quite brusquely, as he apparently did

according to the evidence given in court, to go away was inviting the woman to become even more excitable and even more emotional.
I felt that my hon. and learned Friend rather laboured the suggestion that Mr. Thompson admittedly had had some drink. He was found to be quite capable of driving his car. It is not an offence to have some drink. I do not want in any way to suggest that the police should let up on people who have too much drink when in charge of cars. On the other hand, can my hon. and learned Friend honestly say that he has never taken drink when he was going to drive a car? If he cannot, I hope that he will look at this in a reasonable light.
In conclusion, I point out again that I believe that the police do an extremely good job in a very efficient way under sometimes very difficult circumstances. When it is publicised that something improper has happened, it is right and proper in the interests of everybody concerned that the facts, if possible, should be elicited in this place.

11.42 p.m.

The Joint Under-Secretary of State for the Home Department (Mr. David Renton): There is a conflict of evidence on some of the material facts in this case. There is a great deal which is not in dispute. The House is not a court of law, and we cannot attempt to try the case here. My hon. Friend the Member for Gillingham (Mr. Burden) has said some fairly harsh things about the police. What he has said is based upon the version of the facts which he has obtained. I propose to give the facts as reported by the police.
These are the facts. On the night of Easter Saturday at 11 p.m. two City of London police officers were returning to their homes from duty in plain clothes. My hon. Friend has asked me to say whether they were on duty or off duty. That is beside the point, because a constable is always a constable and, whether he is on duty or not, if called upon or if circumstances demand it he must exercise the powers of a constable. They were travelling on a private motor cycle combination, which was the private property of one of them.
As they were passing through Brixton they slowed down for some traffic lights. As they did so, Mr. Thompson's car—


the car which later turned out to have Mr. and Mrs. Thompson in it—pulled in ahead of them, having come from their offside. As the car did that, Mr. Thompson called out, you have cut me up Stop at the first policeman."The traffic lights turned green, and the car and the motor cycle moved off.
A little later Mr. Thompson's car swerved in front of the police constable's motor cycle and forced one wheel of the motor cycle combination on to the pavement on the nearside. Mr. Thompson's car then drove on and the two police constables followed. Mr. Thompson's car stopped outside Brixton police station, and the police officers on the motor cycle combination stopped behind it. One of them went up to Mr. Thompson, who had not got out of his car, and explained to him that if he wanted to report the matter to the police he should go into the station and do so. While this was being said, the police officer noticed a very strong smell of alcohol, so strong that, coupled with the driving which he had witnessed, he felt obliged to arrest Mr. Thompson for driving under the influence of drink. Mr. Thompson was, therefore, taken into the police station by the two officers.
In accordance with normal procedure in cases of driving under the influence of drink, the police surgeon was called to examine Mr. Thompson. The police surgeon arrived a little later and formed the opinion that, although Mr. Thompson had been drinking, he was not unfit to be in charge of a car. The inspector in charge of the station, who was of the Metropolitan Police, therefore decided to refuse the charge of driving under the influence and, in accordance with well-established practice when refusing a charge, he apologised to Mr. Thompson, who was allowed to go. A good deal has been said about this apology, and I shall refer to it again later.
Meanwhile, Mrs. Thompson had come into the station, and, in the opinion of police officers there, her behaviour and appearance indicated that she was drunk. She was, according to what I understand from the police, abusive and obstructive. They asked her to leave, but she continued to behave in an obstructive manner. After several warnings, she was arrested for being drunk and disorderly.

She was not examined by the police surgeon, for it is not the rule for police surgeons to be called in in ordinary drunk and disorderly cases.
The next day, Mrs. Thompson appeared in court. The case was, as my hon. Friend has said, dismissed by the magistrate, but in doing so the magistrate said:
I shall dismiss this case, but it is obvious that your behaviour was such that it naturally led to your being arrested".
Much has been made of the fact that the police officer's private motor cycle had a defective rear light. My hon. Friend has asked me particularly to deal with this point. Both City police officers say that at no time did Mr. or Mrs. Thompson, so far as they are aware, point out to them that their light was not working. They did discover this themselves after Mr. Thompson had overtaken them, after the second incident when he had swerved into them. They then found that the light was defective and was flickering on and off.
My hon. Friend has asked me why it was that Mrs. Thompson was at first told to go away from the police station. The reasons are these. When she first came into the station just after 11 p.m., it was noticed by officers in the station that she staggered, that her eyes were glazed, that her speech was loud and slurred, and that she smelt of drink. Her husband was in the charge room awaiting the arrival of the doctor, and it was felt, rightly or wrongly, that her presence there would have interfered with the doctor's examination and the investigation of the charge. Her attitude was hostile and although she was asked to behave, she refused to do so, and she had to be ejected from the station. But because she kept up her pressure and the behaviour I have mentioned, she was arrested. Those were the reasons that she was at first asked to go away. It was not a very great hardship on her because, after all, her husband's car was standing outside the station and she had only to go back to it and wait instead of, as the police felt, making a nuisance of herself at the station.
Having studied this case very carefully and fully, I say that the case against the police cannot possibly be substantiated on either view of the facts.

Mr.Burden: I have not tried to establish any case against the police. I re-emphasise that. I said that this matter ought to be brought into the open because of the publicity which was against the police; it is right that it should be. I have not tried to establish any case against the police. I must make that quite clear.

Mr. Renton: I am very grateful to my hon. Friend, and he must forgive me if I gained a completely different impression both from the speech he has just made and from the questions he put at Question Time on two occasions.
The real point in this case, and in other cases like it, is that if Mr. or Mrs. Thompson consider that there was either a malicious prosecution or a wrongful arrest, they can take the matter to court by civil action. They have not done that. Neither have they made any complaint to either of the chief officers of police who might be considered to be concerned, namely, the Commissioner of the City Police and the Commissioner of the Metropolitan Police. There is a well-known, well-established disciplinary procedure for investigating complaints against police officers if those complaints are made to chief officers, who never hesitate to use that procedure when necessary.
I felt that my hon. Friend, although ho. must correct me again if I have misunderstood him, was suggesting that, because the inspector refused the charge against Mr. Thompson, the two City officers were wrong in arresting him. That does not follow. There are many occasions when police constables feel obliged to arrest or report a person because of his behaviour but the superior officer, the officer in charge of the station, decides after carefully considering the matter that the charge should not be pursued.
That does not mean that the officers who report the matter are in the wrong. On the contrary, they may well have had a duty to report the matter and they might be failing in their duty if they did not do so. Nor does the making of an apology indicate any fault on the part of the police.
I am at a loss to understand, even now, my hon. Friend's precise purpose in raising this matter, but I have done my best to give him the facts as they are known to the police and as they have been passed on to me. On those facts, I cannot find that the police have done anything wrong or anything contrary to approved and established practice. It seems to me that the police officers appear to have done their duty. I am sorry that my hon. Friend feels about the case as he does and I am afraid that on this occasion I am unable to express any sympathy with his point of view.

Mr. Burden: My hon. and learned Friend must not get the idea that there is some sort of vendetta on the ground that the action of the police under any circumstances is sacrosanct. If it is felt, as it has been implied in national newspapers, that police officers have behaved incorrectly, I believe it to be in the interests of the police, and of the public, particularly when there is little or no opportunity of testing the case in court, that the facts should be made known.
I have no brief for Mr. Thompson or anybody else who drinks while in charge of a car, but the implication in the Press, which was read by many people, was leading to disquiet. In the circumstances, I am quite happy with the reply which my hon. and learned Friend has given

Mr. Renton: I am obliged to my hon. Friend.

Question put and agreed to.

Adjourned accordingly at six minutes to Twelve o'clock.